The Intermediary – August 2024

OPINION ⬛ Expert insight across residential, buy-to-let, specialist finance, and more

INTERVIEW ⬛ Maria Harris on the future of homebuying under a new regime

12 ROUNDS ⬛ Industry heavyweights go head-tohead on the issues

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From the editor...

N

ow that the dust has se led on the new Labour regime, all anyone can talk about in the housing market is that 1.5 million figure.

Whether with excitement or a raised eyebrow, everyone is waiting to see whether – unlike so many before it – this will be the Parliamentary term when we see real delivery on new housing.

I’m as anti-Tory as they come, and even I can’t find a way of laying the previous failures entirely at their door. A new Government doesn’t magically do away with all the barriers to building that have got in the way and made housing starts fall woefully short for so long.

It remains to be seen how this will work out in practical reality, but there is of course the question of radical planning reform, taking a hard line with the ‘NIMBYs’, rethinking greenbelt definitions and protections, and of course, the ever-present promise of investment.

As anyone even tangentially involved in the housing market has been shouting from the roo ops until hoarse, though, it’s not just about the numbers. Developing the wrong type of housing in the wrong place, without consideration of demand, demographics, local infrastructure, social need, environmental impact, and more, will simply compound the problem. We cannot simply throw housing starts at the issue.

One of the questions raised in our feature this month is the issue of the ‘dream home’ versus the ‘starter house’. For a long time, whether

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due to low mortgage rates, Government-backed schemes, or perhaps aspirational social media culture, we have been convincing first-time buyers that they won’t have to compromise. Too many people are looking to take their first step onto the property ladder and move straight into their ‘forever home’.

This is reflected in building strategies. Without demand driving development, there have been ever fewer ‘starter home’ properties built. Now, when a young couple can no longer afford to move straight into a three-bedroom detached with plenty of ‘room to grow’, they are le with no realistic alternatives.

Housing strategists – whether stimulating development or supporting buyers – would be remiss to forget that there is a full life-cycle to consider. Just as our feature this month looks beyond first-time buyers, Government must look past a blanket approach to housing starts.

Our magazine this month continues its focus on the housing market as a holistic piece, si ing down with Maria Harris of the OPDA to talk about her work to bring Government policy and industry strategy together for the good of the future home buying process.

Who knows, with a tech-enabled process and stock that actually caters for changing homeowner needs, the future home buying process might not be seen as universally awful! A girl can dream. ●

Jessica Bird @jess_jbird

@IntermediaryUK

The Team

Contributors

Jessica Bird ................................ Managing Editor

Adam Evetts | Alan Longhorn | Alison Pallett Andrew Blackwell | Averil Leimon Buster Tolfree | Claire Askham Daryl Norkett | David Abbey | David Lownds David Whittaker | David Wylie Donna Francis | Geoff Hall Hannah Smith | Hubert Fenwick James Pagan | Jerry Mulle | Jess Rushton Kate Davies | Kate Mcternan | Laura Thomas Lisa Martin | Louise Pengelly Mark Blackwell | Maria Harris Matt Tristram | Matthew Cumber Michael Conville | Narinder Khattoare Natalie Hines | Raphael Benggio Robin Johnson | Steve Carruthers Steve Davey | Steve Goodall | Steve Williams Tom Denman-Molloy | Tom Renwick William Reeve

Jessica O’Connor ...................................... Reporter editorial@theintermediary.co.uk

Stephen Watson ................................................. BDM stephen@theintermediary.co.uk

Ryan Fowler ............................................... Publisher Felix Blakeston ................... Associate Publisher Helen Thorne ........................................... Accounts finance@theintermediary.co.uk

Barbara Prada ............................................. Designer Bryan Hay .................................... Associate Editor Subscriptions subscriptions@theintermediary.co.uk

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OPINION ⬛ Expert insight across residential, buy-to-let, specialist finance, and more

INTERVIEW ⬛ Maria Harris on the future of homebuying under a new regime

12 ROUNDS ⬛ Industry heavyweights go head-tohead on the issues

Intermediary.

The

www.theintermediary.co.uk | Issue 19 | August 2024 | £6

BEYOND FIRST-TIMERS Supporting a healthier property life-cycle

Copyright © 2024 The Intermediary

Cover illustration by Ed Wishewsky Cartoons by Giles Pilbrow Printed by Pensord Press

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August 2024 | The Intermediary

3

Contents

INTERVIEWS & PROFILES

In Profile 10 TIPTON & COSELEY BUILDING SOCIETY

Adam Evetts on modernising the mutual model

18

Feature 26 B E YO N D T H E F I R S T - T I M E B U Y E R

Hannah Smith asks what support is needed to improve the entire property life-cycle

REGULARS

The Interview 18

Broker business 46

OPEN PROPERT Y DATA AS SOCI ATION

A look at the practical realities of being a broker, from mental health to handling feedback

Maria Harris discusses driving change in the homebuying process

Local focus 58

12 Rounds 42

This month The Intermediary takes a look at the housing market in Birmingham

On the Move 62

An eye on the revolving doors of the mortgage market: the latest industry job moves

Matt Tristram and Buster Tolfree go head-to-head on seconds

Q&A 54 PAY M E N T S H I E L D

SECTORS AT-A-GLANCE

Residential 6 Buy-to-let 22 Specialist Finance 30 Later Life 39 Second Charge 40 Technology 49 Protection 52

Louise Pengelly outlines the key takeaways from the most recent Adviser Survey

Meet the BDM 36 TOGETHER

Kara Williams on the challenges and opportunities facing business development managers

The Intermediary | February 2023

3

RESIDENTIAL Opinion

Adopting a common sense approach to self-employment

T

he employment landscape is changing.

Factors such as the pandemic and the cost-of-living crisis are impacting working pa erns in various ways, leading to an increase in customers with complex financial situations. These changes cover a whole spectrum of scenarios, from people who are seeking a be er work-life balance to those taking on second jobs or additional income streams to make ends meet.

The result is a much wider variety of employment situations for lenders and brokers to navigate, including self-employment, contractors – including short-term – sole traders, freelancers, second jobs or a mixture of different types.

At the start of this year, there were 4.3 million self-employed people in the UK, covering both full and part-time.

While this is still below pre-pandemic levels, the figure has increased in the past year. There’s also a suggestion from the Office for National Statistics (ONS) that some of the fall since the pandemic is partly due to people describing themselves as employees rather than self-employed when the furlough scheme was created.

So, self-employment remains an a ractive prospect for millions of people in pursuit of improved flexibility and control over their working life.

Added to that, we’ve seen a rise in people taking on additional income streams, such as a second employed job or a freelance contract. A recent study by Henley Business School found this applies to one in four UK adults, who were mostly doing it to pursue a new passion, or because they wish to increase their household income in light of higher cost of

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The Intermediary | August 2024

living. The la er scenario applies to an estimated 5.2 million workers, the survey suggests.

But what does this all mean for lenders and brokers trying to help people secure mortgages?

Flexibility As lenders, we need to adapt our mortgage solutions to meet the needs of this changing workforce. We can do this by accepting that people don’t fit into neat full-time salaried boxes, and adopting a more common-sense approach to criteria and affordability.

It’s also about working closely with brokers to ensure they understand that there are options for clients with a more complex employment situation and what those options are.

At Bank of Ireland for Intermediaries, we’ve developed our Bespoke proposition for good quality complex cases. Our personalised, flexible service ensures that as long as your clients meet our five golden rules we’ll assess cases on an individual, common sense basis.

It means we can look at situations outside the ‘norm’, such as contractors with multiple contracts or gaps in contracts, those self-employed with one year of accounts, clients who work as locums, and those in specialist industries such as barristers and dentists.

This approach is making a real difference to loan applications. For example, we were able to approve a loan of £1,249,500 at 85% loanto-value (LTV), where one of the applicants had become self-employed in the last two years. The company was in the same industry they’d previously been employed in, but they wouldn’t have been able to secure the loan on standard terms with this employment history.

ALAN LONGHORN is head of sales, distribution and marketing at Bank of Ireland for Intermediaries

They were able to provide evidence that the company was performing well, including one year’s finalised accounts and the latest year’s net profit a er tax and salary.

While we would normally require evidence of dividends being received on standard terms, we were able to use the information provided for our income assessment to achieve the loan amount required, as part of the Bespoke service.

Case complexity The focus is on taking the time to understand the complexities of individual cases and whether affordability can be met, even if it’s not through more traditional means.

Achieving successful outcomes also relies on good levels of communication all round, so that brokers understand our approach and when we can help, and are therefore well equipped to support a wider variety of borrowers.

We’ve significantly invested in our services to intermediaries and clients, including launching a new ‘working with us’ hub where all the resources needed at every stage of the application can be accessed.

This is in addition to Intermediary Live Chat and a daily underwriting surgery where our business development managers (BDMs) can speak to underwriters about individual cases.

The result of all this is a commonsense approach for complex cases, with consistency from enquiry to offer, and brokers who are able to keep their clients updated at every stage of the journey. ●

RESIDENTIAL Opinion

July 2025 – a date for the diary

T

he 31st July saw the implementation of Consumer Duty rules on closed products and services, extending their remit beyond new products, which came in this time last year. For lenders, though, this marked another important date in the regulatory calendar – one year and counting until the Basel 3.1 rules on capital adequacy come into force.

Operational staff and systems have borne the brunt of many market and regulatory changes in recent years. In particular, the stream of regulatory upgrades has changed the need to record and evidence good practice.

The need for agility to cope with this volume of change is not going away.

It is now six months since the Prudential Regulation Authority (PRA) published the first of two “near-final” policy statements covering the implementation of the Basel 3.1 standards for market risk, credit valuation adjustment risk, counterparty credit risk and operational risk. They were dubbed “near-final” simply due to a technicality that requires legislative changes to be approved by the Treasury.

Pillars of Basel The second paper, focused on credit risk – standardised and internal ratings-based approach – credit risk mitigation, output floor, Pillar 3 disclosures and reporting, is due to be published imminently.

For now, though, we have the final policy for scope and levels of application, market risk, credit valuation adjustment, operational risk, Pillar 2, and currency redenomination. To recap on the proposed changes under Basel 3.1 rules, the reforms materially change the way a number of risk weightings must be calculated, requiring a significant shi in capital allocation, and as such, future lending decisions.

There are various key changes, some of which are still subject to amendment, which are likely to shi lender appetite for certain types of borrower and asset.

The PRA has suggested that the valuation of security should be embedded at the point of origination, with valuations for the purpose of recording loan-to-value (LTV), and therefore capital exposure, reset at remortgage at the end of a fixed term.

Incoming regulation in just 12 short months means systems and operations will need to flex” It’s likely that the intention to require firms to base a property’s valuation on “prudently conservative valuation criteria,” with this valuation needing to be “undertaken by an independent valuer who possesses the necessary qualifications, ability, and experience to execute a valuation,” will remain.

The finer details will depend on lender status and final regulatory wordings; however, there have been indications that the PRA has taken responses to its consultation into consideration. As it stands, Basel 3.1 rules propose to impose different risk weight treatments on borrowers with more than three mortgaged properties dependent on cashflows generated by the property. The borrower’s primary residence is excluded from this threeproperty limit, unless any charge on it is dependent on the cashflows generated by their property portfolio.

Where a lender becomes aware that the borrower has breached the three-property limit subsequent to loan origination, the risk weighting must be changed to that of exposure

JERRY MULLE is UK managing director at Ohpen

materially dependent on cashflows generated by the property. This will require residential lenders to have oversight of a borrower’s other real estate exposure – something that takes considerable system control and interoperability.

Further ongoing risk weighting relating to loan-to-values will also become par for the course, with lenders likely to assign higher risk to higher LTV exposures throughout the lifetime of the loan – taking a more nuanced a itude to capital value fluctuations long-term.

Compliance minutiae aside, Basel 3.1 will mean increased intensity of competition for vanilla business, as capital costs become a competitive consideration – even more than now.

This will put pressure on margins and could result in more high street competition for niche markets as larger lenders bid for business with higher capital costs, but a bigger tolerance for higher pricing.

All of this points to a market subject to even swi er fluctuations in price sensitivity – lenders must prepare themselves for agility to become a key pillar of service delivery. The need to flex quickly to pursue be er margin business in many niche markets will grow.

The a ermath of Liz Truss’s miniBudget proved just how exposed lenders are to unanticipated market events, underlining how important quick reactions are when it comes to protecting capital adequacy and managing balance sheet risk.

Incoming regulation in just 12 short months means systems and operations will need to flex to meet demand – particularly as a new political direction shapes lenders’ collective interest in other markets. ● August 2024 | The Intermediary

7

RESIDENTIAL Opinion

Helping skilled foreign nationals settle and purchase

I

n recent months, the previous Government took a noticeably firmer line on immigration. Away from the more contentious issues around people coming to the UK illegally, there’s also been a change in tone – and policy – toward those making perfectly legal and correct applications to work in the country.

In April, the minimum salary threshold was increased from £26,200 to £38,700 to raise the barrier to entry for skilled foreign workers. Even the new Government has repeatedly said that as a country we need to reduce our dependence on overseas talent.

However, the latest Government data reveals that monthly Skilled Worker visa applications have remained pre y steady despite this salary threshold change.

The Home Office has projected that it will be granting half a million ‘in country’ visas to foreign skilled workers by 2028-29.

Expanding options In short, the trend of skilled overseas workers looking to se le and call the UK their home isn’t going away any time soon.

This is why we’re continuing to innovate and expand the reach of our recently launched proposition aimed at foreign nationals, a group that brokers tell us have historically struggled to obtain mortgages due to restrictive criteria around credit history and length of stay.

The early appetite that brokers are showing for the proposition is positive proof of the scale of the challenge that exists.

We have seen interest from 33 different nationalities, from as far afield as India, New Zealand, Ghana, Australia, USA, Belgium and Nigeria.

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The Intermediary | August 2024

ALISON PALLETT is sales director at Nottingham Building Society

Interestingly, we’re also seeing appetite coming from all corners of the country, with brokers submi ing mortgage applications from Dartford to Swansea and Wigan.

It’s a great start. However, finding ways to be er support under-served

The debate around skilled migration, and our perceived reliance on overseas talent in critical sectors like healthcare and technology, isn’t going away” segments of the market is part of our DNA as a forward-looking building society. So, we’ve recently expanded the proposition by accepting Global Talent and Pre-se lement visas as part of the mortgage application process; this is in addition to already accepting Skilled Worker and Tier 2 visas.

The Global Talent visa addition does not tie borrowers to a specific employer and does not mandate a minimum salary requirement, offering flexibility and recognising the high earning potential linked with specialised skills.

While the Pre-se lement visa allows EU and Swiss nationals who were living in the UK before the Brexit transition period to live and work indefinitely, brokers told us that despite their stable status, many holders of this visa were facing difficulties in accessing mortgage products that could help with their

needs. By including this visa type in our mortgage criteria, we are addressing a gap that has long existed in the market.

The debate around skilled migration, and our perceived reliance on overseas talent in critical sectors like healthcare and technology, isn’t going away. However, the statistics and conversations we have with brokers tell a clear story.

Applications for visas continue, which means applications for mortgages continue, and we are commi ed to supporting as many of them as we can.

Breaking barriers It’s fundamental that we continue to find ways to break down the barriers that prevent people achieving homeownership, and what I love about the continuous evolution of our mortgage proposition is that solutions are developed with brokers, in response to their feedback, and designed to be easy for them to offer.

Foreign nationals represent just one segment of the borrower landscape which we’re focused on supporting.

For too long, non-traditional segments of the borrower community have found it harder than they should have to secure a mortgage because of restrictive criteria.

We’re determined to be part of the solution, and work with our broker partners to break down these barriers wherever we can. ●

RESIDENTIAL Opinion

A building society perspective DAVID LOWNDS is head of products and marketing at Hanley Economic Building Society

T

Building societies will play a pivotal role in shaping a resilient and accessible housing market

he UK housing market has been a dynamic and o en unpredictable landscape over recent years. As we navigate our way through 2024, several key trends and factors are shaping the market, impacting both buyers and sellers.

From a building society perspective, understanding these dynamics is crucial to providing a range of financial products which meet the ever-shi ing needs of our members and intermediary partners.

The economic backdrop is one of the primary drivers of the housing market, and there is some positive news emerging. Office for National Statistics (ONS) figures show that Consumer Price Index (CPI) inflation fell to the Bank of England’s 2% target in May, down from 2.3% in the previous month.

CPI last hit 2% in July 2021, almost three years ago, and has fallen from its peak of 11.1% in October 2022. CPIH inflation, which includes owneroccupiers’ housing costs, rose by 2.8% in the 12 months to May, down from 3.0% in the 12 months to April.

Supply and demand Despite some potential buyers and movers staying on the sidelines waiting for this interest rates drop, it’s

fair to say that demand for housing remains robust, and this is largely being driven by demographic changes, including population growth and household formation.

However, supply constraints continue to pose challenges.

The rate of new housing completions still lags behind the required numbers to meet this demand, with planning regulations, land availability, and construction costs among the factors hindering the pace of new-builds.

Affordability also remains a significant issue for many prospective homeowners, as the ratio of house prices to average earnings remains high, particularly for firsttime buyers.

Specialist support Building societies are particularly a uned to these supply-demand dynamics. By offering mortgage products – o en specialist ones – which can support an array of borrowing needs, it’s a sector which continues to play a key, and varied, role in facilitating homeownership.

As a society, we certainly remain commi ed to enhancing accessibility to the housing market, from firsttime buyers through to meeting the immediate and future needs of those borrowers in their twilight years.

There are also other important influencing factors which are helping shape the housing market and financial service offerings.

Digital mortgage platforms, automated valuations (AVMs), and online customer service tools have all risen to prominence, enhancing efficiencies and improving the customer experience.

Many building societies are investing heavily in such technology, to streamline processes and provide more accessible products and services to members and their intermediary partners, including us here at Hanley.

One of the biggest tech lessons we have learned since the implementation of new systems has been the importance of collaboration in overcoming a host of obstacles from a digitalisation perspective.

In a tough lending environment, the fewer hurdles that are placed in the way of potential buyers the be er, and improving the homebuying journey from a lending perspective is a vital part of speeding up and simplifying what remains a somewhat combative and arduous journey for too many.

A more joined-up approach can help deliver be er outcomes in allowing our customers to save safely and confidently build for their own futures.

By understanding and responding to the economic, demographic, and regulatory landscape, building societies will play a pivotal role in shaping a resilient and accessible housing market, and they will continue to be a cornerstone of support for potential buyers, existing homeowners and their intermediary partners across the UK. ● August 2024 | The Intermediary

9

In Profile.

Tipton & Coseley Building Society

The Intermediary speaks with Adam Evetts, chief executive at Tipton & Coseley, about modernising the mutual model

A

fter 30 years of working in building societies – including Chelsea, Yorkshire, the West Brom and Vernon – Adam Evetts takes a long view on an even longer-standing sector. Having joined Tipton & Coseley in February 2020 as chief risk officer, Evetts saw a “baptism of fire” when Covid-19 hit, followed by stepping into the role of CEO in January 2024.

He says: “I am really excited by the mutual sector. There’s so much to offer, serving as a bridge between the high street and the specialist sector.”

The Intermediary caught up with Evetts to discuss his first six months at the helm, and the balance between modernity and tradition within the mutual sector.

Defining features

With a history in risk, Evetts has a “broad and deep” understanding of all elements of the mutual business, which gave him strong grounding to take over as CEO. However, one of the first things he learned was that this would be a very different challenge, with less room for “juggling everything.”

Having already seen the firm through the risk lens, Evetts understood where certain processes needed modernisation in order to get the Tipton to its top performance.

For example, he knew that speed to market could be a “quick win” to help improve the society’s product change process, while also benefitting the customer and addressing their changing needs in a still challenging environment.

Tipton has since reduced its time to market to a few days.

Evetts adds: “The way we were viewing certain things just didn’t feel right – we needed to be more customer-focused, and we needed to include the broker within that definition. To that end, we need to make sure we deliver a frictionless process.”

The next area Tipton is looking at is improved internal support, including employee development and training.

Evetts continues: “Overall, it’s about trying to be a bit more modern. Mutuals have all realised we need to invest more in technology, for example.

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The Intermediary | August 2024

“The market is incredibly dynamic, and if you’re not on the money in terms of pace of change, you risk getting left behind.”

Tipton & Coseley has a broad proposition of products it does well – Shared Ownership, residential, buy-to-let (BTL), later life, and expat residential products, to name a few. According to Evetts, during Covid-19 the firm’s continued strength was due to its resolution to “stick to what [we’re] good at.”

He adds that the society is quite clear on where its strengths are – taking great pride in its service and relationships, for example, as well as being agile and quick to react due to its smaller size.

To maintain these foundational elements, Tipton’s lending committee meets every day, not just to gain insights into cases that sit “around the margins” of existing criteria and say yes on an ad hoc basis, but to also spot patterns and understand where the product proposition ADAM EVETTS needs to be updated.

One trend Evetts has seen in particular is a need for greater inclusion, as lifestyles and income structures become more complex. For example, he points to missed payments during Covid-19 which might now be affecting borrowers’ credit profiles.

Embracing change

Having been around since 1901, Tipton & Coseley has seen vast amounts of change in the market. In that time, Evetts says, a key lesson has of course been that staying up to date on technology “can be a huge win.”

Beyond this, he adds that – over the past 10 to 15 years in particular – the dependence on brokers has shifted.

He explains: “Around 95% of our lending is now through the broker market. Therefore, the role of the broker isn’t just about being a strategic partner to help us expand and tap into new customers, it’s much more about seeing them as a customer.

“We need to provide a service that the brokers like. It’s about making sure the processes are frictionless, which is where tech comes in. Our [business development manager (BDM)] network has also expanded, so we get insight from them to understand what brokers and customers are seeing. That insight is certainly key to us.”

I N P RO F I L E

Nevertheless, the mutual’s strength also lies in the fact that “fundamentally, our purpose hasn’t changed since 1901.”

Evetts says: “We’re here to give people a place to call home and somewhere safe to put their savings, and that premise still remains true.”

One particular change over the past year, of course, has been the onset of Consumer Duty, which Evetts says can be either seen as a source of pain, or a value add.

He explains: “With 30 years in risk management, I know that regulation done right can be a business enabler. Some have a perception that compliance is about business prevention, I don’t believe that.

I’ve worked hard to ensure that compliance is a tool to protect the society and its customers, working with the business not against it.”

Not just a mortgage

One of the factors that has remained a throughline across the society’s history has been a grounding in social purpose. Tipton is “not just here to maximise profit,” but also to support and make a difference to the community.

“That sense of social purpose motivates us internally, and hopefully resonates with members and the wider market,” says Evetts, adding that this is increasingly important to borrowers.

“For the past five years in particular, the idea of social impact has really become something we can differentiate ourselves on,” he explains.

“Mutuality means we can be clear on our social purpose. We can sponsor local sports teams, support financial education – there’s lots of things that, because we don’t have a profit maximisation target, we have the flexibility to do more of, where we think the need is greatest.”

This is only becoming more important, as the next generation of borrowers start to centre lender responsibility and social good; as Evetts says, “this is what we’ve been doing for over 100 years, so let’s start shouting about it.”

He adds that the mortgage market is already part of this wider conversation about social good, considering that customers do not set out to buy a mortgage, but a home. Measures such as the Mortgage Charter, for example, tap into the importance of helping people manage through difficult times without losing their homes.

Taking the long-term view

For Tipton, building a sustainable, positive impact business has always been about continually considering what customers need, listening to what they ask, and tapping into changes.

Indeed, for Evetts, the question is not around how to balance history with modernity; Tipton was founded more than 120 years ago, and while

the market mechanisms may have changed, its grounding ethos is both historical and a lynchpin for how the firm stays modern.

“In order to be around for another 120 years, we need to build a sustainable business,” says Evetts. “We are here for the long term, rather than just caring about the next X number of years and maximising growth or profit short-term.”

Looking ahead, Evetts says that the Tipton has a strong pipeline of research and development, as well as system improvements, internal training, and ensuring the right resources are deployed at the right time.

Understanding the importance of tech, he says that a solid mortgage platform for brokers is one of the first priorities. When the market does pick up, Evetts warns, the influx of new business can mean that service levels suffer, so it is important to take the time now to refine these processes.

For borrowers, the future likely has its ups and downs. Payment shocks will still have an impact, regardless of the recent drop to the base rate, and credit issues will continue to shape the market.

This means making sure that the arrears team has the right amount of support.

A particular trend shaping the market long-term is likely to be the shift in retirement and pension patterns and the rise in intergenerational and family assisted lending, as well as second charges and equity release. This is an area where the UK needs to get past some cultural issues around debt in retirement.

All of this is a matter of evolving lender propositions, and Evetts adds, “critically, communication of the options with brokers.”

Overall, Evetts suggests that the UK should be more willing to take inspiration from European markets, allowing for a change to the traditional route into and through homeownership.

He says: “It’s going to take a long time, but we need to provide the right product set to support that, coupled with broker understanding of that proposition.”

For Tipton & Coseley, specifically, the near future is about confirming “what we really care about,” which includes investing further in its personalised approach to underwriting, considering where desktop and automated valuations might be best deployed, focusing on the broker as a customer, and being realistic about credit issues.

Evetts concludes: “It’s possible we’ve historically been a bit conservative. We need to take a bit more risk, which is something we talk to the board about as part of our corporate planning. They understand that risk and reward go hand in hand, and that there are some areas where we could be a little bit bolder, without compromising the safety and long-term sustainability of the business.” ● August 2024 | The Intermediary

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RESIDENTIAL Opinion

Making the process easier with criteriabased lending

TOM DENMAN-MOLLOY is intermediary sales manager at Mansfield Building Society

This also helps brokers to free up time that may otherwise be spent waiting and talking through individual cases with various lenders.

I

Improved processes and confidence in the criteria can help brokers find solutions swiftly

n an ever-changing mortgage market, one of the greatest challenges for the modernday broker is to balance the requirements of mortgage lenders with the needs and demands of their clients.

This can be particularly difficult in the current climate, where higher living costs, combined with political and economic uncertainty, are prompting lenders to frequently reassess and amend their lending criteria. Regular product changes and client credit criteria can really test availability for brokers and their clients.

Helping brokers deal with these challenges is extremely important, which is why we launched our criteria search function earlier this year.

Delivered with mortgage technology partner Mortgage Brain, our aim is to provide the criteria search to make the mortgage research and application process simple and straightforward for brokers.

Power to assess Being a criteria-based mortgage lender means any broker accessing our website will now find it easier to search for specific criteria, as well as being able to check affordability

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The Intermediary | August 2024

and product availability across our residential and buy-to-let (BTL) product range.

Given the ongoing affordability challenges faced by many borrowers, particularly those who may have one or two credit blips to their name, enabling brokers to swi ly determine which Mansfield product is best suited to the needs of their client is crucial.

This is why the search also includes our specialist Versatility and Credit Repair criteria, alongside our already accommodating prime criteria.

Being able to search for specialist products is especially important for the more complex cases, where a client does not fit the one-size-fits-all criteria of high street lenders. This includes borrowers who may have a couple of missed payments or defaults, and also those with more serious County Court Judgements (CCJs), Debt Management Plans (DMPs) or bankruptcy cases.

Assessing the needs of these clients can be time consuming, particularly when it comes to trying to identify the finer details that first led to the credit default. Instead, by using the criteria search function, brokers can get a be er understanding of whether our criteria will fit the borrower’s needs and background much more quickly.

Better relationships Being able to more quickly determine whether a client’s needs can be met also means the broker’s time can be used more efficiently to generate more business, or to focus on other clients who may also have complex needs.

This streamlined approach also benefits clients, as the speed at which a decision can be made means the brokers can sooth any anxieties and turn a possibility for a purchase or remortgage into a certainty. It’s a real win-win for both parties.

This is particularly relevant in the current market, where time is of the essence when it comes to securing a mortgage deal. With rates changing regularly and the supply of available housing so limited, borrowers know that being able to move quickly is a distinct advantage.

We were once told by a broker that, when making a recommendation to their client, the lender becomes effectively an extension of the broker’s brand and it’s the broker who holds the power.

By constantly seeking to improve our processes, we can play our part to help brokers find the solutions they need within seconds of visiting our website.

Improved processes and confidence in the criteria can help brokers find solutions swi ly and empower more borrowers with complex needs. ●

RESIDENTIAL Opinion

Better prepared, stronger decisions

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any mortgage holders have been eagerly awaiting the next Bank of England rate cut in the expectation that it will lead to significantly lower monthly mortgage payments.

Unfortunately, they are largely wasting their time. The truth is that mortgage rates, for most, are not going to come down substantially any time soon. Even then, we will have to wait a long time for them to return to the rock bo om rates that the UK had previously become used to.

There may well be more incremental cuts over the next couple of years in the Bank Base Rate, but the days of low-rate fixes – especially those of 2%-and-lower variety – are gone. At least for the time being.

Higher payments Households with mortgages up for renewal will face significantly higher payments until 2026 at the earliest, because of the nationally and internationally tightening credit market. The majority of mortgages up for renewal at the present time have effective mortgage rates of less than 2.5%, way below what is now available. As a result, about two million mortgage loans are projected to experience a monthly cliff-edge payment increase by 2026 of hundreds of pounds. For a further 2.7 million mortgages with longer periods le on their fixes, monthly costs could soar even higher.

Unless you are on a tracker – which most are not, given that 74% of mortgages in the UK are fixed – changes to the Bank Base Rate are going to make li le or no difference.

Government and personal indebtedness have reached historically high levels, and creditors want higher returns given the greater supposed risk exposure. This is not going to change overnight, especially with a Labour

Government now in power. 10-year Government gilts that were trading at under 0.5% four years ago are now priced at over 4%, higher than even under the brief Truss era.

The uncomfortable fact is that borrowing is now more expensive.

Homeowners will have to dial in a larger chunk of disposable income for their mortgage direct debits, and lenders are going to have to get used to higher costs of funding from wholesale and retail markets, plus increased risk.

A new phase The last time the mortgage market had a crunching of gears this dramatic was back in October 1989, when rates doubled to 14.88%. Since that time, we have all got used to interest rates being stable and low: dri ing from 5% to 0.5% in 2009, to remain there until the end of Covid-19.

The mortgage market has moved into a new phase. Alongside the higher rates, there are cost-of-living rises and heightened regulatory oversight in the form of Consumer Duty and vulnerability to consider. The challenge to personal and commercial finances is considerable. Affordability is going to limit borrowing and default rates, which have been rising, will continue to do so.

Thankfully, unlike the last significant gear change, we now have a completely different decisioning ecosystem, underpinned by fintech that, if used correctly, will minimise the costs of transition for both the lender and borrower.

Plug-and-play auto-assisted underwriting platforms using CRA, a range of third-party data sources and Open Banking, such as LendingMetrics’ ADP, are going to come into their own by allowing lenders to precisely calibrate lending to market conditions on an hour-byhour basis. Scaling up or down the risk spectrum is only ever a few clicks

DAVID WYLIE is commercial director at LendingMetrics

away. As is taking a granular view of every applicant to get real-time insight into their lending suitability. Unwise borrowing is much easier to detect.

Additionally, machine learning makes this already smart decisioning even smarter over time. Our own DataOrchestrator, for example, allows users to interrogate data they receive from third-parties in a way that is optimal for whatever environment they find themselves in. Whenever a package of data arrives, the lender creates bespoke characteristics via a straightforward editor interface. The lender can finesse sets of predictive questions over time and across multiple data inputs to decision against.

Notably, this is the first period of higher interest rates in which lenders have the tools to make sophisticated assessments. Obviously they will only be made on new business cases.

Historical lending based on more analogue technology will remain and present a higher default risk profile.

However, even here the technology makes loan book management a far more exact science. Lenders can tap into data feeds that can pre-warn underwriters when borrowers are on course to miss payments.

A single pre-emptive telephone call while the borrower is still able to meet their commitments can be used to reschedule a loan, rather than the usual situation of having calls ignored a er they fall into arrears.

Lenders now have access to data and analysis that will guide them to making optimal decisions, from both the lender’s and borrower’s perspective. Decisions that they would only have been able to dream about 20 years ago. ● August 2024 | The Intermediary

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RESIDENTIAL Opinion

More lenders must serve borrowers with disabilities

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recently spoke at Dudley Building Society’s AGM about how it’s helping those with long-term disabilities into homeownership.

When I discuss the support available for borrowers with long-term disabilities, it o en opens people’s eyes to the significant difference homeownership can make.

It can be surprising to learn how few lenders support the Governmentbacked shared ownership scheme known as Home Ownership for People with Long-term Disabilities (HOLD).

Currently, just two: Dudley Building Society and a niche retail bank.

As someone who has been running a specialist mortgage broker for borrowers with disabilities for over 25 years – and who helped set up HOLD – I would love more lenders to get involved.

Through HOLD, we’ve helped more than 1,600 people with long-term disabilities become homeowners. That might seem small in the grand scheme of the market, but for many of those borrowers, homeownership has been life-changing. Still, there’s a lot more that could be done.

Over the years, we’ve seen a rotation of eight or nine lenders come and go.

While we are extremely grateful, each time one withdraws it creates a space to be filled, which can be challenging.

I’ve presented to most major banks at one point, and while there’s o en genuine interest, turning that into participation can be difficult. Many banks have automated systems that don’t easily accommodate the manual underwriting required for such applications. It has happened in the past that when a mutual transitions into a bank, the partnership ends – not necessarily by choice, but because larger institutions typically lack the

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The Intermediary | August 2024

flexibility offered by lenders like Dudley Building Society.

It’s been just over 10 years since Dudley started supporting the model, and from speaking with its members, I know that HOLD aligns well with its ethos of helping underserved borrowers. The society is justifiably proud of its work in this area. We can confidently say that it has changed the lives of a range of individuals, from younger people moving out for the first time to older applicants who’ve been trapped in residential facilities many miles from their community.

Despite the focus on Consumer Duty and the needs of vulnerable clients, unfortunately li le is being done to encourage lenders to support those with long-term disabilities.

Why is it important?

HOLD doesn’t just change lives, but actually saves them. Sadly, some of our applicants have been abused in residential facilities, and shockingly, there have been a number of deaths in these se ings. Homeownership through HOLD puts the individual firmly in control of their life and future. They can choose the type and location of their new home, move close to family and friends, and if necessary change their care provider without having to relocate. In fact, they can live in their own home for the rest of their life.

The majority of our applicants are unable to work in paid employment and rely on state disability benefits.

They also have li le or no savings.

Both factors mean it’s normally impossible to secure a traditional mortgage. HOLD is different, because it can take benefit income into account, and these mortgages are usually interest-only, with the capital being repaid when the property is

DAVID ABBEY is managing director of MySafeHome Limited

eventually sold. The model allows borrowers to part-buy either from the open market or developments specifically for shared ownership.

We’re seeing increased demand, particularly from people who’ve been living independently but whose landlords are now looking to sell.

These tenants, with help from a housing association, could even buy their current home, maintaining their independence and community ties.

A manual approach The application is a combined effort, and can involve ourselves, housing associations, care providers, local authorities, applicants and families, and mortgage lenders. This does not fit neatly into an automated system.

It’s important that applicants are carefully assessed to ensure they’ll be eligible for all state disability benefits and the Support for Mortgage Interest (SMI) loan that will make their longterm homeownership sustainable.

The fact that most of our homeowners are still living in the property that we helped them buy – some celebrating 25 years – proves just how safe, secure and sustainable the HOLD model is.

Like us, Dudley recognises the diverse needs of our clients, taking a flexible approach with a friendly, efficient and professional service.

To continue making a real difference, we need more lenders. In return, the applications we submit are, in the words of Dudley, “the best packaged cases we receive.”

While it may not generate recordbreaking mortgage volumes, it has the potential to transform lives. ●

RESIDENTIAL Opinion

Going the extra mile to support first-time buyers

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rospects appear to be improving for borrowers with small deposits. Recent data from Moneyfacts shows that the number of products available to borrowers with a 5% deposit increased to 361 in June, the highest level since May 2022.

The new Government has also promised to make the Mortgage Guarantee Scheme –aimed at encouraging lenders to provide 95% loan-to-value (LTV) mortgages – permanent, rather than a temporary measure.

Providing mortgages at high LTVs is crucial for lenders that want to support those taking their first step onto the housing ladder, which is why April Mortgages offers its innovative 5-year to 15-year fixed rates at up to 95% LTV. First-time buyers, perhaps even more than those who have been in the housing market for some time, value certainty over their repayments.

They are taking on a mortgage for the first time and want to be confident over their prospects of covering that commitment for the long term, not just in the here and now.

As a result, it’s not surprising that we have seen significant interest in our groundbreaking range for those taking their first step onto the ladder.

Delivering greater support It’s not just the products themselves, but how much the borrower can raise through the mortgage, that will determine whether they are able to secure the property that has caught their eye.

Loan-to-income (LTI) caps can prove a barrier here, restricting the amount the borrower can obtain.

April Mortgages is determined to

provide the support needed by these borrowers, though, which is why we recently increased our maximum LTI to up to six-times income.

It means that the borrower is be er able to access the sums needed for their desired property purchase, while also enjoying the sort of peace of mind that has historically not been on offer in the UK mortgage market, courtesy of our fixed rate mortgages of between 5-years and 15-years.

Boosting deposits A further challenge that aspiring buyers face is the deposit. Se ing aside a sufficient sum has become far more difficult in recent years, and as a result, taking that first step onto the housing ladder can feel like something of a pipedream.

Rising house prices have played a part here, since rising prices mean the deposit needed also grows. Data from the Office for National Statistics (ONS) shows that the average property is now worth £285,000, having increased by 2.2% over the past 12 months. In cash terms, that’s a jump of £6,000.

Saving that bigger deposit is trickier, though, as household budgets are under greater pressure everywhere.

While inflation has now fallen, it has been high for a long time, meaning those would-be buyers have had to pay out more each month on those regular household bills like food and energy.

The issue is only exacerbated if the would-be buyer is renting, and so will have had to deal with rents rocketing by 8.6% on average over the past 12 months, according to the ONS. Perhaps it’s unsurprising, then, that so many are turning to the ‘Bank of Mum and Dad’ for support.

Analysis by Legal & General suggests that loved ones provided financial support in 318,400 house purchases

JAMES PAGAN is director of product and portfolio management at April Mortgages

last year, with an average gi of more than £25,000.

We want to make it easier for those parents and grandparents to use their equity to provide those gi s, which is why we have improved our criteria to include gi s as a reason for capital raising.

Doing so means the borrower can secure the certainty and peace of mind that comes from a longer-term fixed rate mortgage, while also providing a valuable helping hand to the homeowners of the future.

Not just first-time buyers Of course, it’s important to bear in mind that it’s not just first-time buyers who are the beneficiaries of these changes. There are plenty of borrowers already on the housing market who will find their next move, or even their next refinance, more straightforward as a result of our increase to the LTI cap.

Similarly, there will be borrowers who want to raise capital to provide a gi for loved ones for other reasons beyond use as a deposit.

Ultimately, April Mortgages wants to change the mortgage market for the be er, delivering peace of mind and certainty to a much broader range of borrowers. It’s not just about helping people purchase their home, but helping them remain in it too, as they are removed from the stress of interest rate fluctuations.

Instead, they can budget in confidence, knowing what their mortgage will cost them for the long term. ● August 2024 | The Intermediary

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RESIDENTIAL Opinion

Existing stock is key to delivering net zero

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omes are where Brits’ hearts are, and they have always been. Successive Governments have recognised this, launching a positive array of housing schemes designed to get more firsttime buyers on the ladder and make access to homeownership more affordable.

While many of those schemes – such as Help to Buy and Shared Ownership, for example – have succeeded in helping more people become homeowners, the real break in the market has always been supply, and the insufficiency of it. It’s that age-old equation of supply and demand: the UK is simply not building enough new homes to keep up with the growing demand from rising population numbers and growth in the number of single person households.

It was fighting talk, then, when in her first speech as Chancellor of the Exchequer, Rachel Reeves confirmed Labour’s pledge to build 1.5 million new homes by the end of this Parliament.

Central Government will also get final say on planning approvals, with the power to overturn local planning authority decisions to reject applications should they disagree.

Building on green belt land is also under review, as is building safety regulation and leasehold reform. The party has promised to “deliver the biggest increase in social and affordable housebuilding in a generation” and a “new generation of new towns.”

Next year, compliance with the Future Homes Standard (FHS) will become mandatory. This means all new homes built from 2025 onwards must produce between 75% and 80%

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lower carbon emissions than homes built under the current building regulations.

‘New’ is good, it appeals to news desks, it inspires voters. However, it’s worth reminding ourselves that ‘existing’ is actually a much, much bigger consideration.

The latest Census data showed there were 26.4 million dwellings in England and Wales – and all of those need to be given a ention when it comes to net zero targets. Roughly a third of those homes are owneroccupied and have a mortgage charge against them. Another third sit in the private rented sector, with a large number of those owned by landlords with buy-to-let (BTL) mortgages.

Decarbonising A recent House of Commons Library report reasserts how big a task decarbonising housing stock will be.

In 2022, emissions from residential buildings accounted for 20% of greenhouse gas output in the UK. Emissions from residential buildings come mainly from fuel combustion, the burning of oil and gas for heating and hot water, and electricity use.

Homes can be decarbonised by installing low-carbon heating systems such as heat pumps, fi ing insulation, and installing renewable energy systems such as solar panels.

The Climate Change Commi ee (CCC), the Government’s advisory body, said the UK will not meet its emissions targets “without near complete decarbonisation of the housing stock.”

This puts a huge weight on the shoulders of homeowners and landlords. In a nod to the scale of the challenge, Labour plans to double its investment to upgrade five million homes, taking funding to £6.6bn.

MARK BLACKWELL is COO at CoreLogic

The Warm Homes Plan will offer grants and low interest loans for insulation, solar panels, ba eries and low carbon heating to cut bills for “every home that needs it.”

It’s a step in the right direction, but in truth, it will take a lot more than this to meet net zero by 2050. Data from the Office for National Statistics (ONS) shows that in England and Wales last year, four in five dwellings used mains gas as a main fuel source for central heating. Across all regions in both countries, the median estimated CO2 emissions for existing dwellings was more than double the estimated emissions of new dwellings.

In London, the median estimated CO2 emissions for existing dwellings is four times that for new dwellings.

Of all dwellings built before 1930 in England and in Wales, more than 80% were rated in Bands D to G. Decarbonising these homes must be made a bigger priority, despite it being a tougher challenge than cu ing emissions from homes purpose-built for this end. Ultimately, it will fall to lenders to deliver on this front by way of meeting their allowable Scope 3 emissions exposures. These are emissions not produced by the company or by activities from assets it owns or controls. Instead, it’s emissions produced by those that it’s indirectly responsible for up and down its value chain.

There is an opportunity for lenders – saving borrowers money on energy is as much an incentive to retrofit homes as cu ing emissions is for those with that debt on their balance sheets.

We are helping many lenders make those strategic decisions right now. ●

RESIDENTIAL Opinion

Labour and the London market

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he new Government has commi ed to the mammoth task of building 1.5 million homes over five years, as well as to increase Stamp Duty by 1% for overseas buyers and introduce a Freedom to Buy scheme to ensure low deposit mortgages are available for first-time buyers. All of this will take time, and it is unlikely we will see any big decisions until the autumn Budget.

Industry experts think that there could be a boost to the London property market if interest rates come down and Stamp Duty is abolished; however, as Labour has promised to increase Stamp Duty by 1% for foreign buyers, this is looking unlikely.

A combination of high interest rates and uncertainty in the run up to the election could well have resulted in a demand which will help to stabilise the market. The London property market ended 2023 on a high, and the outlook for this year is still a positive one, with the expectation of lower

base rates and reduced mortgages.

Some areas of the capital are still thriving, with Richmond upon Thames, Camden, Newham, and Islington all recording small price increases. Meanwhile, prime areas of London such as Westminster have seen a rise in the number of properties going under offer.

For first-time buyers or investors, up-and-coming locations are areas such as Queens Park, Hayes in West London, and Colindale in North West London. All these areas are undergoing regeneration and already have excellent transport links, making them future property hotspots.

The latest Prime London Demand Index by Benham and Reeves shows an uptick in demand for high-end properties in Q2, reversing the downward trend observed earlier this year, although annual figures remain lower. In Q2, nearly one in five prime London properties found a buyer, with demand increasing by 0.4% from Q1, though it is still 3.8% below last year’s figures.

ROBIN JOHNSON is MD at KFH Professional Services

London, of course, has many masters, and recently re-elected mayor Sadiq Khan has pledged to lobby the Government for new powers, and billions more in investment, for affordable housing in the capital.

He has reportedly confirmed that he will continue to argue for more funds to help London tackle its housing crisis, and has been lobbying in recent months for a £2.2bn ‘emergency stimulus’ package to boost home-building.

London is the sum of many markets, and their collective fortunes can be very disparate. This is, in many ways, why London remains so resilient. Help to any part invariably supports others in the medium term.

If Labour follows through with its promises to build, and builds the right types of property for its population, it will once again thrive. ●

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August 2024 | The Intermediary

17

The Interview.

OPDA

into the pain points in the buying and selling process, later becoming the OPDA. As founder and chair – in addition to being non-executive director at UTB and providing board advisory services for various businesses – Harris has made it her mission to work with the Government and the industry to revolutionise home buying.

Harris had already started to communicate these issues to the last Government, only to be faced with a setback in the form of a General Election. Now that the dust has settled and the opportunity for change is on the horizon, The Intermediary sat down with her to take a look at the current state of the digital mortgage journey, the ideal future for the process, and the policy changes that will get it there.

Jessica Bird speaks with Maria Harris, chair of the Open Property Data Association (OPDA), about driving change in the homebuying process

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aria Harris, chair of the Open Property Data Association (OPDA), has worked in the mortgage industry since 2005.

Prior to this, Harris worked full-time in contact centres, as well as raising a then six and one-year-old, attending university at 30, which led her to be headhunted

by HBOS and, in her words, to “fall in love with the mortgage industry.”

From working with HBOS through the Global Financial Crisis, to spending time in the building society sector, helping design the UK’s first digital mortgage at Atom bank in 2014, and contributing to the Land Registry ‘digital street’ initiative, Harris quickly gained a wide-ranging understanding of the home buying journey, and a passion for the “digital revolution in banking.”

In 2018, the Home Buying Selling Group was formed on the back of a Government inquiry

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The road so far

Harris points to legislation that was working its way through prior to the General Election that could form the foundation of improvements to the home buying process. This included the Digital Protection and Digital Information (DPDI) Bill, which reached the House of Lords’ committee stage before stalling.

Harris says: “The DPDI underpins the move from ‘Open Banking’ to ‘Open Finance’, which would then include mortgages and be hugely helpful for us, and also the next phase of the reusable digital identity.

“The digital identity is already live, but the home buying process is the first where the consumer has to share it with multiple [parties] in the transaction.

“The DPDI would underpin making it reusable, and creating the supplementary schemes through the Digital Identity and Attribute Framework, to then have a home buying sector specific scheme.

“It would also underpin the legal position for private sources of property data to be digitised to the standards that we need – things like utilities, energy, broadband.”

In addition to backing the bill, the Department for Business and Trade (DBT) implemented a Smart Data Council, which looked at matters such as better energy switching, as well as home buying.

“The bill and the council are the two things that we need stood up really quickly to get that

T H E I N T E RV I E W OPDA

momentum moving again, having lost a few months during the election,” Harris says.

Getting these back on track would, she adds, fit with the Government’s direction of travel, as well as Consumer Duty, the route to net zero, and an increased focus on data transparency for consumers.

“Smart data is about opening up customer use and control of their own data, and making the economy smart,” Harris explains.

She makes it clear that the smart data movement is not about centralisation or consolidation. This is an industry with many different data sources, and it will continue to be so, but much like Open Banking, this is about access and transparency.

Harris explains: “The data will continue to live in its ‘home’ – whether that’s the Land Registry or your utilities provider – but what we’re lacking is the infrastructure and the ecosystem for people to access and share that data securely.”

Party politics

Now that the Labour Government has bedded in, Harris calls for a return to the progress that was disrupted by the General Election.

While the housing conversation among the major parties’ manifestos has tended to focus on planning reform and boosting housing stock, not the overall process or buyer experience, there are positive noises around the use of data since Labour took over.

“We’ve never had a Government that has looked at this holistically,” Harris says. “No one has ever been responsible for the end-to-end consumer experience.

“I would love this Government to be the one that does it, because somebody has to help us fix this.”

Harris describes this as both a “Government and an industry problem,” whereas Open Banking was delivered due to a mandate from the Competition and Markets Authority (CMA) that made it compulsory for banks. In contrast, this sector is facing a more complex revolution, with varied data sources that sit across both the public and private sectors – therefore “not something the industry can solve for itself.”

Harris, like many others, calls for a more holistic, overarching approach to the housing market, headed up by a ‘homebuying Tsar’ – namely, a figure committed to bringing together this “huge and very disparate industry.” This would include oversight of Government departments, local authorities, private sector businesses, regulators and trade associations.

Harris identifies an important ally in Baroness Penn, currently on maternity leave, who was appointed Parliamentary Under Secretary of State in the Department for Levelling Up, Housing and Communities in 2023, and her maternity cover Baroness Swinburne, who she says are “absolutely committed.” Nevertheless, an overarching figure is sorely needed.

Two forward, one back

The election was just one recent setback in a process that has felt, at times, like it takes a step back for every two forward.

Harris says: “One of the most frustrating things for me is that you go back to the inquiry in 2017, and then the response in 2018, and Government already committed to a whole bunch of stuff that we are now asking for.

“This is stuff that we’ve proven is the right thing to do, and that we’ve already delivered through Open Banking.

“The amount of progress that had been made on those commitments and promises was really low. There’s lots of stuff there that should have been done, and just hasn’t.”

These measures include open source data for Land Registry, searches, planning permission, and building regulations, as well as working with the industry on implementing digital identity, e-conveyancers and e-signatures.

“None of that is currently live in the home buying process, and all of it was promised six years ago,” says Harris.

Despite a commitment from the previous Government to implement tech and stimulate innovation, Harris argues that the process has, in fact, “gone backwards.” She points to fax machines and unsecure emails still in use, as well as the fact that when the inquiry launched in 2017, the time to completion was 12 weeks – deemed to be too long – and has now stretched to 22 weeks.

“It’s horrific how much worse the customer experience is,” Harris says. “It’s even more stressful now – the only thing deemed more stressful is dealing with bereavement. It’s a sad indictment of the industry.”

Other elements discussed in 2017 were the need for transparency and up-front information, using property passports, and standardised information, which the OPDA is calling for once again today.

The OPDA has written the framework for standardised information and quality standards for digital information.

Harris says: “That work is all there, on the shelf, waiting for someone to pick it up → August 2024 | The Intermediary

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T H E I N T E RV I E W OPDA

and run with it, but someone needs to take accountability for delivering it and driving it through.”

Having someone with overall responsibility means, in theory, less short-termism and reliance on Government motivations that only stretch as far as the next Parliamentary term.

Harris says: “The task is quite big, and I don’t know how many Housing Ministers I’ve had this conversation with since just 2018.

“Although the civil service teams are amazing, every time someone new comes in you have to start again with briefing, working out where it sits in their priorities, and then there’s all the macro- and micro-economic factors that happen at the same time.

“The process from getting planning permission to someone getting the keys to their new house is, itself, about six or seven years. Since I’ve been in the industry, we haven’t had a Housing Minister who’s lasted that long. It’s no wonder we never quite get the strategy right.”

The outlook is positive, though, as Harris points to the King’s Speech on 17th July, which included the Digital Information and Smart Data Bill, specifically mentioning the need to improve the home buying experience.

The bill will establish digital verification services, support the creation and adoption of secure digital identity products and services from certified providers, as well as Smart Data schemes, allowing for the secure sharing of customer data with authorised third-party providers.

Grassroots movement

One of the reasons this industry, and the systems and processes that underpin it from both the private and policy perspective, has not been forced to change at the same pace as others, is a lack of push from the consumers themselves.

Where seamless digital journeys are expected in many walks of life, home moving is a rare experience, done once or twice a lifetime for many people, and is so painful that once over, most do not want to think about it for some time – let alone engage with a discussion on how it can be improved.

“We are conditioned to believe that it simply is stressful – we get told that on day one,” says Harris.

“This is a problem for the industry. There’s high levels of mental ill-health, customers say the journey is terrible, but there’s not enough people going through it at any one moment of time to collectively shout about it.

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“I’d love to see consumers voting with their feet like they do elsewhere, but the reality is that they accept it when they’re told ‘that’s the way it is’, and the industry accepts it, too.”

Harris’ own experiences in other industries – including travel and utilities – gives her a clear perspective on what could be different.

She says: “If in the travel industry there wasn’t a universal system of codes and information, it would be carnage, but we accept that in home buying – we wouldn’t accept this in any other retail industry.”

The first step in getting consumers engaged with the need for change is, itself, data transparency and cross-industry standards; customer engagement and demand will likely be driven in the first instance, somewhat counterintuitively, by the market.

To this end, the OPDA is almost in a position to start sharing and showcasing the first fully digitised customer journeys.

Harris says: “Now that we’ve been live for a year, our founding members have all been implementing the standards and joining up their own propositions.

“We’ll be able to show the ‘before and after’, showing all of the pain and time we took out, and all the added transparency and trust, and what the journey actually looked and felt like.”

Harris says that the commitment of OPDA members, which include tier one banks, means that the “natural tipping point” will come quickly, where consumers will be having such a good experience in some areas of the market that it will be obvious where they are not, causing others to follow.

Forging a path

Harris’ mission is to provide a clear path forward for policy and the industry. First, in addition to the positive moves already made, the Government must reinstate the promises made in response to its inquiry, challenge what has not been delivered, and publish its promised white paper, ahead of creating an “actual roadmap of who’s going to do what, and when, and how that’s going to be funded.”

It is important to tackle what Harris calls the “huge productivity challenge” in the homebuying industry. She points to LawtechUK research that found each homebuying transaction generates 130 documents and about 300 contact points between the various participants.

“That’s nine million hours that the industry is wasting on unproductive tasks because we haven’t digitised this,” Harris says. “That business case must pay for itself.”

T H E I N T E RV I E W OPDA

The OPDA will continue its work with the Digital Property Market Steering Group (DPMSG), which includes the trade associations and trade bodies responsible for all the moving parts of this industry.

Harris calls for the Government to give these trade bodies greater autonomy, budget and technology, in order to give them “a mandate, and the teeth, to get this done.”

However, she warns, there will always be a “vested interest” in not pushing forward from those “happy with the status quo” and who benefit from keeping the journey as it is.

In addition, with a chronic lack of properties and high demand, there is arguably little impetus to improve, particularly without someone spearheading an end-to-end overview, and a focus on accountability.

This, combined with antiquated tech and legacy architecture, as well as the fragmented nature of the industry, are all barriers to progress that the OPDA is working hard to overcome.

Well-functioning market

While the road to full digitalisation is a long one that will need collaboration across the industry and Government, Harris says there is work that can be done now within individual businesses to get the ball rolling.

“We need that digitisation process to start,” she explains.

“In the meantime, our members are creating digital property packs for people selling properties, which can be created using trusted third-parties and shared with their estate agent, buyers and conveyancers. There’s nothing to stop anyone doing that today.

“Meanwhile, the data standards that we produce are all free and can be implemented today. They can also collaborate on those standards – it’s open source.

“We’d love to see digital property packs on all transactions now, while we wait for whatever mandation is going to look like.

“And we’d love to see technology teams and software providers in the industry adopting the data standards and connecting to others in the ecosystem using those data standards, so we can start getting that data to flow.”

Harris believes that, with the right level of collaboration and digitisation, that 22-week timeframe could dramatically reduce to 15 days, which makes the work that must be done a “no-brainer.”

It is not just this sector that will benefit from the improvements Harris outlines. She explains that a solid, well-functioning housing market is

fundamental to the overall health and recovery of the UK economy.

Nevertheless, with the process currently so onerous, there are many people sitting in a house that is unsuitable to their needs – or who simply desire to move – who are avoiding doing so because they “can’t face going through the process.”

Easing that process and helping these individuals move through the housing lifecycle, will free up stock and create more movement throughout the pipeline.

At the moment, without greater collaboration, those who are working to fix the housing market still tend to do it in their own siloes, which Harris says simply “moves the problem.”

Confidence boost

Part of Harris’ mission is to boost consumer confidence and move away from an environment where all that potential home buyers hear is negative headlines and complaints about stress.

Consumer confidence is lacking across all aspects of the industry, from estate agents and conveyancers to the cost of mortgages.

Harris asks: “How do you start increasing confidence so that people who can and want to move actually do so, and can do so in a way that provides them with certainty and reliability?”

In answer, the OPDA’s initial goals are broader use of its open data directory and digital property packs, raising standards, and creating trust and interoperability to lay the groundwork while the Government does its own work to improve policy.

“Our commitment is to extend that schema by the end of 2025 to cover everything for a residential property case,” Harris says.

“From a property being built to it being dismantled, we’ll cover everything where a standard is needed.”

She concludes: “We’ll continue to drive adoption and onboard members across the industry.

“We’ll also continue to persuade the lender, intermediary, estate agent, conveyancer and software firm communities, and everyone in between, to join us on the journey, as well as working with the Government and pushing for mandation.

“We need to create a minimum level of data, technology and security standards, so that we raise the level of the entire industry, reducing fraud and failure, and making it better for the customer.” ● August 2024 | The Intermediary

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B U Y - TO - L E T Opinion

Labour must have clear intentions for the PRS

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Does the Labour Government value rented accommodation as a form of tenure?

he writer Robert G Allen once said: “The more clarity you have, the more powerful your goals are.” While Allen meant these words in the context of creating wealth, there is a lesson here for politicians.

In my 30-plus years in the industry, no Government has had a cleareyed vision for the private rented sector (PRS) or taken the time to consider where it fits into the wider housing market.

Instead, legislation is o en shortsighted and designed to win votes, rather than to solve a particular problem, which nearly always leads to sub-optimal outcomes.

The only ‘strategy’ the previous administration had for the PRS was to shi the blame to landlords for its woeful record on housing.

What concerns me so far about the new Government is that it looks as if it will follow the same uninspiring path as its predecessors.

Admi edly, when I sat down to write this, we were just four weeks into the new administration’s reign.

However, so far, we know next to

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The Intermediary | August 2024

DAVID WHITTAKER is CEO of Keystone Property Finance

least Band C by 2028 at the latest.

Labour’s manifesto reveals its desire to bring in legislation that would achieve something similar.

So why, then, didn’t the party pick up the baton following the tragic death of Sir David Amess, the politician who first submi ed the bill? Instead, Labour let it wither until it was finally ditched earlier this year.

Delivering on the details nothing of Labour’s plans for the PRS, other than what was in its manifesto, which was not a great deal.

There are more than 4.6 million households in the PRS – it is simply too big to ignore. Yet it was mentioned just twice in Labour’s manifesto.

All we know so far is that Labour plans to introduce a Renters’ Rights Bill (RRB) and has hinted at raising the minimum energy efficiency of homes in the PRS. But where is the detail?

We know that the RRB will look to abolish Section 21 notices, which allow landlords to evict tenants without giving a reason.

This was also the central plank of the Conservatives’ Renters (Reform) Bill. If Labour’s plans are essentially a rehash of the Renters (Reform) Bill, then why did Ma hew Pennycook, the new Housing Minister, engage so li le with it, other than to vote down two amendments with the rest of his Labour colleagues in April?

The same can be said of the Minimum Energy Performance of Buildings (No. 2) Bill (MEPB), which would have forced landlords to bring their properties up to an Energy Performance Certificate (EPC) of at

If Labour intends to push ahead with new requirements to make the PRS more energy efficient, it needs to provide details.

Will it insist that properties have a minimum EPC rating of Band C, as per the MEPB, or might the bar be raised higher? Will it ditch the deeply flawed EPC system and use an entirely different metric altogether to measure energy efficiency? Will there be exemptions? How will it be policed?

What will be the punishment for noncompliance?

These are all very big questions that need to be answered – and quickly. But we need more than that.

We also need to know from Labour how it sees the PRS fi ing into the wider housing market.

We know the Government wants to significantly boost housebuilding, but does it value rented accommodation as a form of tenure? It should, given that the PRS provides homes for a significant chunk of its traditional supporter base.

Now that the election has been won, it isn’t time to be cautious – it’s time to hear from the new Government what plans it has in store for the PRS. ●

B U Y - TO - L E T Opinion

Diversifying – what do brokers need to know?

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t will be no surprise to any broker that the property market has been beset by recent challenges, which have impacted landlords and driven them to amend their strategies. While there has been some movement within the buy-to-let (BTL) sector, primarily from smaller landlords choosing to exit, it has been the show of resilience and ambition by larger, professional landlords that has characterised the market.

Indeed, many have seen market developments as opportunities as well as challenges, considering the makeup of their portfolios and adapting their strategies moving forwards.

Rising HMO popularity Houses in multiple occupation (HMOs) have been a long-time favourite of the professional landlord, but interest in this property type has ballooned over the past year. In 2022 and 2023, HMOs made up 27% of all Shawbrook’s BTL business. This number has already risen to more than a third (34%) in 2024.

Interestingly, while portfolio landlords – those with more than four properties – are the main driver of this trend, we have also seen a rise in HMO business from non-portfolio landlords, from 17% to 21%.

There’s also a trend of landlords buying older, tired properties and converting them into HMOs as a way of ge ing into this market.

Conversions now account for 47% of properties being developed using our bridging loans, alongside a mix of houses, individual flats and blocks of flats. HMOs have a number of benefits for landlords, including higher yields, an ability to be er pass through increases in market rents due to more regular tenant turnover, and strong

tenant demand. However, they also come with additional management needs and compliance responsibilities.

For brokers with landlords looking to get into this space, working with a specialist is imperative. Experts in HMO finance will have the resource to offer tailored mortgages, taking into account the higher rental income that can be achieved compared to the standard BTL. A lender that can support the bridging loan prior to the mortgage will also be useful.

At Shawbrook, we expect that as interest rates drop appetite for HMOs will increase further; brokers, particularly of those smaller landlords who may just be starting to consider HMOs as part of their future strategy, should ensure they are starting to build relationships with lenders and have a good understanding of their expertise in this area.

Turning to semicommercial We have seen semi-commercial applications almost double in 2024 compared to 2023. This is particularly the case in the South East, where 39% of investors have submi ed applications compared to 27% in 2023.

Semi-commercial properties will include an element of both retail space and living space, and will be classed as such if at least 40% of the property is the la er. While they can come with a higher risk of a longer void period if the commercial element needs to be re-let, they also offer landlords more rewards from higher rental yields, as landlords can capitalise on dual revenue streams.

For brokers advising their clients on diversifying into semi-commercial there are factors to consider, for example loan-to-values (LTVs) will typically be no higher than 75%, and

DARYL NORKETT is director of real estate proposition at Shawbrook

lenders will look at both the value and income the property could generate.

As part of this, lenders will o en want to see a commercial lease in place when the application is submi ed, as finding commercial tenants can be more challenging.

Professionalisation While we’re seeing growth in our lending to both non-portfolio and portfolio landlords, larger portfolio landlords are becoming a bigger section of the market. At Shawbrook, our growth in new loan accounts to these landlords is 34% higher than to smaller landlords, while we have seen a 47% increase in landlords seeking loans over £5m from Q4 2023 to Q1 2024. O en the first deal is a more complex asset, rather than the simple BTLs which were the starter asset in the past.

With professionalisation of the market comes more complex deals for brokers to manage. Whether HMOs or semi-commercial, or other property types like multi-unit freehold blocks (MUFBs) or commercial properties, landlords are increasingly looking at how they can expand their portfolios.

Landlords tend to focus on how to generate the most rental yield in order to protect their profitability as interest rates have increased. Brokers with expertise in these complex areas, and relationships with specialist lenders, will likely win out, being able to support their clients as they diversify.

Taking the time to understand and develop this knowledge will therefore pay dividends. The market is ever evolving, and brokers have an opportunity to capitalise. ● August 2024 | The Intermediary

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B U Y - TO - L E T Opinion

Are record rents good news for the lettings sector?

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n July, the Goodlord Rental Index recorded rents that surpassed all previous figures.

Since the index began in 2019, the average rental cost of a property in England has never come close to the £1,470 per month recorded in July.

Rents are up by 7.5% year-on-year.

In July 2023, the average price of a rental property in England was down at £1,367 – which, at the time, was also a new record. In July 2019, rents were £923 per property – a staggering 37% lower than today.

This surge put paid to any hopes that the rental market may have peaked sometime last summer. With voids down and rents still soaring, the ceiling is clearly yet to be hit.

In most markets, rising prices would spell good news for the producers. In this case, that’s landlords. But are spiralling rents a wholly positive thing for landlords and the wider le ings sector? Or are they a short-term boon in an otherwise bumpy market?

Profits less certain With the era of ‘cheap money’ over and mortgage rates now far higher than in the recent past, landlords are facing a much altered economic reality. For some, the ability to command higher rents for their portfolio is welcome – balancing books and boosting margins. But for others, they are still struggling to cover costs. It’s a decidedly mixed picture.

The rise in mortgage costs and interest rates, as well as the growing regulatory burden, is purportedly the cocktail of factors pushing landlords – particularly so-called ‘accidental landlords’ or those with smaller portfolios – out of the market. Some of this housing is moving out of the

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The Intermediary | August 2024

buy-to-let (BTL) sector completely as a result, while the rest is being pulled into the portfolios of bigger market players. This is concentrating the available properties into the hands of fewer, larger landlords.

Few believe this recalibrating of the market has reached its nadir – the spectre of landlord losses hovers over the industry, undimmed by the record rents we’re seeing.

The CEO of Zoopla’s recent declaration that being a landlord in Britain no longer makes sense is a case in point – landlords don’t feel like they’re in clover right now, despite rising rental prices.

A heavier burden Renters are also facing one of the toughest markets in decades. Not only are they having to contend with rising rents while earning wages that haven’t always kept pace with living costs, but there is also sky-high competition from fellow tenants.

According to the latest Goodlord numbers, voids are si ing at just 11 days across England on average.

In some regions, such as the South West, they are as short as five days.

Properties are being turned around at lightning speed to keep up with tenant demand. According to Rightmove, there are 17 renters for every property on the market. Among the Goodlord community, many of our agent customers say they have at least double that figure.

This supply and demand crunch is pu ing renters under huge pressure, with many keen to sign longer leases or build relationships directly with landlords as a result. Others are having to relocate to new areas to find affordable prices or revert back to house sharing to cover their housing costs.

WILLIAM REEVE is CEO at Goodlord

Who wins?

The current picture is set against a backdrop of ji ery landlords and beleaguered tenants. All sides would argue that it is far from sustainable.

A healthy private rented sector has a decent supply of homes at a wide range of price points, healthy competition among landlords, and decent margins available for the entrepreneurs who invest in BTL, all underpinned by clear, consistent regulation.

There’s only one way to create the conditions to make this possible: building more homes.

Across England and Wales, our housing stock hasn’t kept up with our growing population, which has grown by 800,000 people since 2019 – from 66.8 to 67.6 million in 2023.

The houses we do have aren’t equipped for an ever-warming climate. And we have a burgeoning proportion of ‘lifetime renters’ for whom the system isn’t set-up. A radical, rapid housebuilding strategy would significantly redress this imbalance.

The Government is making all the right noises on this front – from ambitious targets for new homes to bullish talk on loosening planning regulations. But new-builds take time – time that many tenants can’t afford and many landlords won’t wait for. Likewise, the tightening of the regulatory screw could continue to make the market una ractive for landlords to invest in, if handled in the wrong way.

If we want to stem the impact and get back on an even keel, we need shovels in the ground now. Only then will we have a sustainable market for both landlord and tenant. ●

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Beyond firsttime buyers SUPPORTING HOME MOVERS FOR A HEALTHIER PROPERTY MARKET Hannah Smith for The Intermediary Home movers and downsizers

have – just like the much-beleaguered firsttimer – faced numerous challenges over years of turbulence in the property market. To name just a few, house price inflation has continued to rise, while the cost-of-living crisis has stretched finances across all borrower types.

The result of these factors is that people who might have otherwise traded up to a more expensive home, downsized to something more manageable, or are living in properties that are no longer fit for their needs, have been forced to stay put.

Carlo Pileggi, senior manager, mortgages at Nationwide, says: “[Older existing homeowners] have generally had the benefit of equity growth over the longer term, and for those who’ve owned for a longer time, a sustained period of record low rates.”

A return to historical norms for interest rates has been a shock for many mortgage borrowers, while some will still be paying the price of Liz Truss’ disastrous 2022 mini-Budget which helped push rates up sharply. More than 104,000 people who took out new mortgages in the two months after are likely locked into expensive fixed deals.

Research from Zoopla found that the average mortgage is now £4,320 a year more expensive, with Londoners paying £7,500 more. Likewise, some next-time buyers will have brought forward their home moving plans to take advantage of Stamp Duty holidays of 2020-21, and then ended up with expensive mortgages when coming off their fixed rates.

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“It’s been a turbulent period for homeowners managing higher rates and the corresponding uncertainty in the housing market,” says Pileggi.

This has caused the market to slow, with house purchase transactions subdued, especially for those purchasing with a mortgage. This suggests that some borrowers are holding off and waiting for more certainty and lower interest rates.

Of course, the other side of this coin is that these borrowers are good prospects being missed out on by the industry.

Interest rates finally fall Interest rates are finally starting to come down, with the Monetary Policy Committee (MPC) voting for a 0.25% cut to 5% on 1st August, although this cut was well flagged and largely priced into the majority of mortgage deals.

Konrad Rotthege, co-founder at Conveyo, says: “Whether it will encourage buyers to move forward, and whether it will bring new energy to the market, must also be seen in light of the general circumstances.

“The cost of living is still an issue, even though inflation has calmed down. Even with a rate cut, buyers still need to consider overall affordability.”

Searching for solutions The average property price for home movers is £392,107, according to Lloyds’ Home Mover Review, a 20% increase from five years ago. At an average age of 40, movers have typically built up a decent chunk of equity, putting down just under £130,000 on average for their next purchase.

Lenders could focus their efforts on making sure their rates are competitive in the lower loan-to-value (LTV) segments where people have built up lot of equity and can put down a large deposit. For those with lower deposits, there are other solutions. For example, specialist lender Kensington Mortgages has launched a ‘Mid LTV’ product range to give borrowers more options at 82.5%, 87.5% and 92.5%.

Meanwhile, mortgage terms of 35 or 40-years are growing in popularity, taking borrowers well past retirement age.

Emily Martin, associate partner at The Mortgage Store, says: “With long mortgage terms, you have to be aware of the risks. Some lenders will lend to 70 or 75, but you need to think about whether you will still be able to work at that age, what if you need to retire due to ill health?

“People are living in the moment when taking these mortgages out, but I do think 35 to 40-year mortgages have their place if used sensibly.”

Could longer fixed-rate deals of 10 years or more, such as those seen in the US, Germany and Denmark, be a solution to interest rate uncertainty and help people budget?

“The main reason they have these long fixed deals is because the funding is being done through the bond markets, whereas the tradition in this country has always been deposit-led,” says Davies, adding that she does not think the UK will move this way, because it would be too expensive for lenders to fund.

For example, there are very few new bungalows being built – in the second quarter of this year, just 391 new bungalows were registered, according to the National House Building Council, down 20% from the previous year.

Mortgage brokers have an important role to play in supporting buyers throughout the property life-cycle. By knowing their market, and the products available, and having strong relationships with lenders, they help home movers secure the borrowing they need for suitable properties.

Lewis says: “Brokers are certainly best placed to be able to help people in today’s ever-changing market, to help them understand the best mortgage to meet their individual circumstances – whether that’s someone affected by the interest rate increases, someone who is looking to buy their next home, or someone who is looking to downsize and cut costs.”

Government support Compared to the average European country, the UK has of a backlog of 4.3 million homes that were never built, a housing deficit that Centre for Cities says would take at least half a century to fix.

The new Labour Government has a target to build 1.5 million new homes within the next

p

Product innovation Lucy Lewis, senior national account lead at Skipton Building Society, says that despite the rhetoric often focusing on first-time buyers, lenders have in fact been proactive in looking for ways to help next-time buyers. This includes signing up to the Mortgage Charter, allowing people to extend their mortgage terms up to 40 years, and innovating to create new products.

Lewis points to Skipton’s Income Booster, a joint borrower, sole proprietor (JBSP) mortgage that allows borrowers to add up to three people onto the mortgage without making them legal owners of the property. The group also has a higher arrangement fee, low-rate remortgage product which might appeal to next-time buyers.

Suffolk Building Society, meanwhile, is promoting self-build and renovation mortgages as a possible solution to the lack of housing stock, and offers loyalty products for energy-efficient self-build homes.

The lender warns that the current undersupply of appropriate housing – for older people in particular – must be addressed if they are to be supported to downsize and keep the market fluid.

“It’s my parents’ old property ladder”

“I could never afford to move out of my first home” five years, and will change the rules to allow development on ‘grey belt’ land – defined as poor quality green belt land.

More than just schemes that help with affordability or deposits, one of the biggest measures needed to get the pipeline moving is simply new housing stock that is fit for purpose, including social and affordable housing.

“We desperately need more public sector housing,” says Davies. “If you don’t have enough social housing, you’re putting huge pressure on the private rented sector [PRS], which means rents go up, and people who might otherwise have been able to save for a house deposit and get on the ladder can’t, because they can’t get over that first hurdle.”

The UK has an ageing population. The number of households headed by someone aged 65 or over will likely more than treble by the late 2040s.

This has been the state of affairs for a long time, but nonetheless, there are simply not enough properties to meet the needs of this growing cohort of older homeowners.

The National Housing Federation predicts that, by 2045, 2.3 million people in the UK will be in unsuitable homes, and there will be a 350,000 home shortfall in terms of retirement and supported housing.

At the end of the property life-cycle, ‘empty nesters’ often remain in large family homes after their adult children have moved out. In some cases, this is due to emotional attachment to their home, or to have a space available for family to stay and congregate. However, there is an argument that others are simply ‘underoccupying’, and themselves might rather move

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to somewhere smaller and more manageable, particularly as their needs change in later life.

It is unclear how many of these homeowners remain in the property because they want to, or how many would move if the process was easier and better properties more available.

“If your property has gained in value, what is the incentive to downsize?” asks Davies. “If you’ve got a nice family home, there’s this assumption that if you’ve got two spare bedrooms then you’re under-occupying a house, which I think is slightly insulting.

“The big problem with downsizing for a lot of older people is that there’s nowhere suitable to downsize to. We don’t all want to go and live in retirement villages, and a lot of the bungalows that were built are being snapped up and redeveloped with another storey on top of them.”

She also notes that lenders may be unwilling to lend on an over-55s property, if a mortgage is needed, because they may have restrictions on who they can be sold to.

Martin suggests that incentives to encourage downsizing, such as a Stamp Duty reduction, might help. However, it seems unlikely that the Government would opt to forego some of its tax take at a time when there is a £22bn hole in the public finances.

Conveyancing and cost The cost and complexity of the conveyancing process is another factor that could be putting blockers in the way of home movers. Almost one-third of property sales fell through before completion in Q1 this year, while the average transaction takes 22 weeks.

Home Movers

In Numbers.

Average age – 40 Average property price – £392,107, up 20% from five years ago Average deposit – £129,951, around 33% of property price Detached properties accounted for 33% of home mover purchases over the last year Source: Lloyds Bank Home Mover Review 2024 Based on data from the Halifax housing statistics database and UK Finance

We need to build houses that can’t be extended Kate Davies, executive director at the Intermediary Mortgage Lenders Association

I

f you build a row of nice little terraced houses, the first thing people are going to do is go up into the loft, and then they’re going to build the sun lounge at the back, or they’re going to have a new ground floor extension.

If you build in a way that people can’t then extend, or build flats, you’re not immediately turning a two-bedroom starter home into a much bigger house, which is much more expensive for the next person coming along to buy.

A lot of thought has to go into the planning – can someone turn this into a five-bedroom monster, or can it be genuinely kept as a small property?

When a three-bedroom bungalow suddenly becomes a five-bedroom or six-bedroom house, that’s great for the person who’s done it, but not great for the housing supply, because we’re not building bungalows.

Rotthege says the buying and selling process in the UK is “backwards,” in that people do not do their due diligence until after they have had an offer accepted on a property, as that is simply the way the system is set up.

This leads to chains collapsing as new information emerges during conveyancing.

People then stay put, because they simply cannot move.

Rotthege’s firm is trying to solve this problem by doing due diligence for properties upfront before people make buying decisions, in a techfirst process similar to the model in Norway.

He notes that the Building Safety Act has made the conveyancing process more complex, deterring many conveyancing firms from handling properties affected by the legislation.

“The uncertainty surrounding potential liabilities, coupled with the extensive due diligence required, has led to increased costs and delays,” Rotthege says. “It’s important that the Government clarifies the legislation to provide clarity for conveyancers and protect leaseholders.”

Dream home ideal Help to Buy helped first-time buyers stretch for a home they might not have otherwise afforded.

Martin suggests that this may have contributed towards unrealistic expectations.

“I was around during the era of Help to Buy when everybody wanted the shiny Barbie Dreamhouse,” she says. “We are used to getting what we want. People don’t want really high interest rates on a big mortgage, but then they turn their nose up at a two-up, two-down terraced house.”

For previous generations, first-time buyers would aim for a ‘starter home’ and move up the property ladder as their needs and means allow.

Now, with long-running low interest rates and the Help to Buy scheme, among other factors, many have high expectations of moving straight into their dream home.

These unrealistic expectations impact nexttimers as well, causing higher demand for properties that previously would have been seen as the ‘next rung’ on the ladder.

To get the property pipeline moving, there must be a shift in mentality, as well as a return to building more properties that fit the definition of a ‘starter home’. While Help to Buy might have helped some buyers stretch, today buying a dream home as a first-time buyer is unrealistic.

“Help to Buy was a catalyst for changing people’s expectations of what their first home would look like,” says Lewis.

“But it does seem that with the withdrawal of the scheme and the increases in interest rates and therefore mortgage payment amounts, firsttime buyers are looking more towards starter homes to get a foot on the ladder.

“There are benefits to the idea of increasing movement through the property life-cycle, but the increases in house prices mean that the cost of moving outweighs the cost of staying put and extending, which is prohibitive.”

A complex set of issues With the many challenges of getting on the property ladder, first-time buyers have understandably been the target of most homebuying initiatives and conversations.

The Building Societies Association said in a recent report that now is the most expensive time to be a first-time buyer in 70 years. FTBs will continue to need support, and they will remain vital to the health of the housing market – as Lewis says: “Without them, next time buyers will not be able to move.”

Nevertheless, next-time buyers and downsizers – often seemingly forgotten in Government schemes – would also benefit from support.

Keeping the market moving means taking a holistic approach that focuses on each stage of the property life-cycle. As new thinking and innovation happens across the property sector, home movers must also be at front of mind. ● August 2024 | The Intermediary

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S P E C I A L I S T F I NA NC E Opinion

Proud to be part of the Growth Guarantee Scheme

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tom bank is delighted to have been accredited by the British Business Bank as a lender under the new Growth Guarantee Scheme. The scheme runs until 31st March 2026 and is designed to support access to finance for small businesses looking to invest and grow.

It is expected to support around 11,000 businesses, and aims to improve the terms offered to borrowers.

However, if we can offer you a standard commercial mortgage on be er terms, we will do so. Lenders that take part are provided with a 70% Government-backed guarantee on facilities of up to £2m.

Timely and affordable The Growth Guarantee Scheme is the successor to the Recovery Loan Scheme (RLS), which closed earlier this year. The RLS, and its predecessor the Coronavirus Business Interruption Loan Scheme (CBILS), played a crucial role in helping businesses get back on track and pursue growth despite a turbulent macroeconomic environment. Atom bank has been a proud participant in both schemes.

In fact, Atom bank was one of the biggest lenders through the RLS, delivering more than £250m in funding, without a single fraud loss.

These schemes demonstrate how lenders and central Government can work to boost business prospects and deliver the economic growth that is so crucial to the nation’s prosperity.

It’s important to recognise, though, that there are certain limitations to the Growth Guarantee Scheme.

It is designed to support trading businesses, as opposed to investors, while there is also a cap of £2m on the debt quantum that can be borrowed.

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The Intermediary | August 2024

Businesses that took out a CBILS, Bounce Back Loan Scheme (BBLS), or RLS facility before 30th June 2024 are not prevented from accessing the Growth Guarantee Scheme, but in some cases it may reduce the amount a business can borrow.

At Atom bank we are keen to support commercial customers looking to raise higher sums outside of the Growth Guarantee Scheme.

Indeed, customers borrowing between £2m and £4m currently qualify for a 0.25% discount on their rate, such is our determination to deliver even more affordable lending terms.

Similarly, Atom bank’s standard commercial mortgage proposition will continue to provide options for landlords and commercial investors alike, alongside our participation in the Growth Guarantee Scheme.

Atom recently passed the milestone of £1bn in commercial mortgage completions, testament not just to our participation in schemes like the RLS and CBILS, but our determination to keep finding innovative ways to assist the nation’s small businesses.

Listening to brokers Brokers have played a central role in Atom’s growth in the commercial market, and will continue to do so.

Intermediaries are a fantastic resource for lenders. They are at the coalface every day, listening to clients and understanding sources of friction, as well as the elements of the market which are underserved, and what changes can be made to ensure that their clients receive the funds and service they need.

At Atom, we’ve focused on using that feedback to deliver a fundamentally easier and faster commercial mortgage origination experience to their smaller business

TOM RENWICK is head of business lending at Atom bank

clients, and the results have been emphatic. A er making more than 100 improvements to our broker portal and underwriting process, we have cut the elapsed time between application and the issuing of an agreement in principle (AIP) by 94%, so that it is typically delivered on the same day.

What’s more, the time from the acceptance of the AIP to the issuing of a credit-backed offer is now below 10 working days on average.

It’s precisely because we have listened carefully to brokers that we are delivering a journey which provides an accelerated ‘time to yes’.

Rising demand The launch of the Growth Guarantee Scheme comes at an opportune time, as demand for funding from business borrowers is resurgent. Our recent SME Pulse research found that almost two-thirds of commercial brokers are seeing a rise in interest in external funding among their clients.

Crucially, the biggest driver here is rising confidence among those business owners who have seen their firms come through the turmoil of the last few years, and now feel they are well set to push on and grow.

Greater appetite from lenders and more product options were also cited by intermediaries as factors in that growing demand, showing that the sector is doing a be er job in meeting the needs of business borrowers.

However, there remains plenty of work to do. Programmes like the Growth Guarantee Scheme are a great starting point for lenders serious about delivering for business borrowers, and Atom bank looks forward to working closely with brokers on providing the funding support needed. ●

S P E C I A L I S T F I NA NC E Opinion

Are MMCs about to have their day in the sun?

H

ousing supply needs addressing, and not even a week into its Government, Labour revealed plans to shake up housebuilding. It promised to build 1.5 million new homes over five years – a big objective. How remains to be seen in detail, but we know already that the centrepiece of Chancellor Rachel Reeves’ housing policy is a radical shake-up of the planning process.

In her first speech as head of the Treasury, Reeves said: “Nowhere is decisive reform needed more urgently than in the case of our planning system…Planning reform has become a byword for political timidity in the face of vested interests and a graveyard of economic ambition…Our antiquated planning system leaves too many important projects ge ing tied up in years and years of red tape before shovels ever get into the ground.”

In brief, Labour has said it will: Reform the National Planning Policy Framework, consulting on a growth-focused approach to the planning system before the end of the month; Restore mandatory housing targets; Create a new taskforce to accelerate stalled housing sites; Appoint 300 additional planning officers across the country; Change the way Ministers use their powers for direct intervention, with the Deputy PM saying she will not hesitate to review an application where the potential economic gain warrants it.

Delivering new homes is vital – our housing market is increasingly distorted and inaccessible for far too many people. Making it easier and quicker to build is a good aim. The

question is how Government plans to deliver the impetus needed to get developers to build at scale.

Most new and planned housing developments include the promise to deliver a certain amount of affordable housing as part of the development, along with other basic infrastructure and amenities. The bulk of the development tends to be made up of larger family homes with three, four and five bedrooms, which sell for a tidy profit.

In considering how to improve the supply of new homes, it’s important to remember the practical reality.

The house building value chain is very fragmented, and commercially speaking, what we build and where and how we build it, ma ers.

Ultimately, Britain needs more affordable homes in areas where there are good employment opportunities.

Yet current profit margins on affordable housing are likely to be skinnier than the top-slice from an executive home. Builders therefore also need to find more profitable ways of building affordable homes when and where they are needed, ideally at various levels of scale.

Housebuilding is bespoke. That makes it a requirement that profit margins are healthy, because it’s a low volume, high margin prospect. It shows in the rate of completions.

Building rates have been falling, with just 23,360 starts recorded in the first quarter of 2024 by the Office for National Statistics (ONS), down 18% on the number started in the previous quarter, and 40% less than two years prior to that. If Labour is serious about building 300,000 new homes a year, there must be a radical rethink about how that is delivered. The sales model must change to support higher build volumes at lower margins.

STEVE GOODALL is managing director at e.surv

Modern methods The National Housing Federation and Building Be er surveyed 57 housing associations to establish the extent of Modern Methods of Construction (MMC) use in social housing. Half said they expect to use more MMC by 2028.

Experts at the HBF said appetite for MMC homes by 2028 could be as high as 107,000.

It makes sense. MMC employs off-site construction. The process is theoretically much slicker, faster and consistent for certain types and parts of construction. It may also play to sector’s strengths and weaknesses.

According to the Royal Institution of Chartered Surveyors (RICS), a shortage of skilled workers has led to a growing gap between demand for infrastructure development and the available workforce. Consequences include delays and increased costs, and limits to the sector’s capability to meet demand.

While the UK hasn’t managed to get MMC off the ground at scale, this may be about to change. Persimmon recently invested in modular home manufacturer Top Hat Industries, which it claims cuts construction time by up to three months. That would make Labour’s ambitious targets more achievable, and importantly, more affordable.

MMC is not a silver bullet. It is part of the blend that will deliver more houses at pace. Everyone, from funders to insurers, builders to accreditors, and particularly buyers, will have to get more comfortable with MMC if we are to build the volume of houses we need. ● August 2024 | The Intermediary

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S P E C I A L I S T F I NA NC E Opinion

Are landlords and investors regaining confidence?

T

he latest Bridging Trends data was recently released, and as always, I was keen to see how the sector fared in 2024’s second quarter. Fortunately, it was good news, with contributor gross lending hi ing £201.8m, a 2.9% increase on Q1’s £196.2m.

What really stood out to me, though, is how bridging loans were utilised in Q2, and by whom.

A er accounting for 55.8% of transactions in Q4 2023, the proportion of unregulated bridging loans fell to 49% in Q1 2024 before climbing up to 54.2% in Q2. With many of these tending to be taken out by landlords and investors, it seems safe to say that an increasing number are turning to specialist lenders to meet their financial needs.

Reasons for this uptick are varied.

The majority of Q2’s bridging loans were used to prevent a chain-break, rising from 19% in Q1 to 23% in Q2.

While these include regulated and unregulated purchases, it points to an

acute need for speed and flexibility, particularly if borrowers have faced delays from high street providers.

While purchasing an investment asset dipped slightly from 21% in Q1 to 18% in Q2, demand for auction finance saw the biggest increase, rising from 9% in Q1 to 14% in Q2 as savvy buyers took advantage of under-value sales.

This is actually in line with what we’ve been seeing here at MT Finance, with more enquiries coming in regarding auction purchases as landlords and investors look for alternative ways to increase their return on investment and generate new income streams.

In total, 55% of bridging loans taken out in Q2 were used to fund some form of property purchase, compared with 49% in Q1.

Coupled with the rise in unregulated loans, this suggests that landlords and investors could be regaining confidence. At the very least, they seem to be more accepting of the so-called ‘new normal’,

particularly as the market is showing signs of cautious recovery.

I would say that it does look like we are going in the right direction, particularly with the news that property prices grew marginally in May and June, according to Nationwide. That there was also fractional growth in July (0.3%) bodes well for Q3, particularly a er the Bank of England voted to cut the base rate to 5% in early August.

Average Charge

Average Monthly Interest Rate

Average Completion

0.86%

52

Purchases take precedent

RAPHAEL BENGGIO is head of lending – bridging at MT Finance

Second Charge

11.6%

First Charge

88.4% 32

The Intermediary | August 2024

DAYS

S P E C I A L I S T F I NA NC E Opinion

As the market slowly picks up, landlords and investors seem to be prioritising purchases they put off in recent years. As is o en the case, speed is usually of the essence, which is why they are opting for bridging finance.

A bridge also gives them the flexibility to wait for up to two years to hold out for more favourable longterm interest rates.

As bridging’s popularity increased in recent years, pressure also grew on lenders, brokers and other intermediary partners, o en resulting in longer completion times. I’ve been encouraged to see that, as speedfocused deals increased, how long it took to get these over the finishing line started to fall, hi ing 52 days in Q2.

Not only was this down from 58 days in Q1, but it is also the lowest it’s been since coming in at 47 days in Q2 2021.

Another upshot of the rise in purchases is that second charge bridging loans tumbled from 21.3% in Q1 to 11.6% in Q2.

Key Points Gross contributor lending up 3% Most popular use of bridging is chain-break Average LTV holds relatively steady at 59.3% Market share for regulated bridging continues to grow

UK bridging finance market trends during Q2 2024 Data: Bridging Trends

If the property market continues to improve, then this could be the benchmark for the next few quarters.

In good news for borrowers, the drop in second charges may also be why we saw the average monthly interest rate start to fall, from 0.89% in Q1 to 0.86% in Q2.

Overall, there are a lot of positives to be taken from the Q2 Bridging Trends data. While it is too early to say that the economic landscape has changed drastically for landlords and investors, we certainly have turned a corner. The focus now needs to be on supporting those who seek out specialist finance, and ensuring we take a pragmatic, solution-led approach. ●

Bridging Loan Purposes Auction Purchase

Business Purposes

Chain Break

Investment Purchase

Re-bridge Finance

14%

9%

23%

18%

9%

Refurbishment (Heavy)

Regulated Refinance

Unregulated Refinance

Other Finance

11%

6%

6%

4% August 2024 | The Intermediary

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S P E C I A L I S T F I NA NC E Opinion

Specialist lending market review

T

he specialist lending market continues to experience significant growth in terms of demand and activity, reflecting its fast-growing perception across the broader mortgage market and increased recognition among landlords, investors, developers and intermediaries alike.

Portfolio landlords Nearly four in 10 (37%) portfolio landlords have said that they intend to increase the size of their portfolios this year, with the majority funding purchases by releasing equity from other properties in their portfolio or using existing capital – 55% and 58% respectively.

This is according to findings from Paragon’s new ‘Portfolio Landlord Report 2024’, which also outlined that 69% of those adding property are doing so as part of a portfolio expansion strategy, 60% are driven by long-term demand for rental property, and 50% are doing so as part of their retirement plan.

The survey also showed that 61% of landlords will buy with a mortgage, and 39% will buy outright. 52% of landlords prefer to purchase terraced homes, 46% semi-detached homes and 26% individual flats.

There has been much talk about the demise of the buy-to-let (BTL) sector in recent times, but robust levels of demand from the more professional end of the market demonstrate that plenty of landlords are actively looking to take advantage of a host of property-related opportunities as they arise.

Despite ongoing speculation around the decline of BTL, this data shows the number of professional landlords and investors who are actively seeking opportunities.

However, finding the right financial solution for a variety of complex property-related transactions has

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The Intermediary | August 2024

become increasingly problematic without specialist support and funding.

DONNA FRANCIS is managing director at Envelop

Development finance New research from Shawbrook reveals that 77% of developers consider securing funding to be the most complicated aspect of their business, with 75% citing limited funding options as a major obstacle.

Additionally, more than a quarter (26%) have faced multiple rejections from mainstream lenders, highlighting the significant challenges in obtaining necessary financing.

However, 77% of respondents stated that specialist lenders offer be er support.

The intermediary market has always played a crucial role” While barriers to entry remain, our experience shows that funding is accessible if developers know where to look and whom to approach.

Specialist lenders can effectively structure funding to unlock liquidity, but some are only accessible via property finance experts who bring additional expertise to the table and can properly package deals to successfully navigate this sometimes thorny lending landscape.

Commercial finance At Envelop, we’ve seen rising volumes of commercial term finance over the year. So, it was li le surprise to see Allsop report one of its highest commercial auction totals in July.

This raised £54.5m from 65 lots with an 80% success rate and an average lot size of £839,000. The sale brought the total raised this year to £291.3m, with 350 lots sold and 85 achieving over £1m – an overall success rate of 88%.

The intermediary market has always played a crucial role in funding the needs of businesses at various growth stages.

In the coming months, there is likely to be an increased emphasis on this role, as a sense of calm has emerged following the largely expected General Election result, and there is reduced anxiety about the future path of interest rates.

Bridging finance The bridging finance sector also continues to experience solid growth, increased optimism and strong forward momentum.

The inaugural ‘Bridging Market Survey’ by Interpath and the Bridging & Development Lenders Association (BDLA) reported that 62% of industry figures expect annual origination volumes to grow. Only 8% anticipate a decline, while 30% predict stability.

The survey also indicates that independent brokers are seen as the most crucial primary channel for originations by 53% of respondents, followed by master brokers at 32%.

For intermediaries who lack expertise in specific areas of the mortgage market, collaborating with a master broker, specialist distributor, or packaging partner – whatever you prefer to call them – can help overcome the challenges of many multifaceted sectors and highly complex property-related transactions.

This is a partnership that not only delivers improved outcomes for clients on a regular basis, but also enhances long-term business prospects. A valuable combination in what remains a transitional property market. ●

S P E C I A L I S T F I NA NC E Opinion

Can the bridging industry support more new lenders?

B

eing a firm believer in competition, I think there is always room for new lenders when the demand is as strong as it is now.

The bridging market is currently an a ractive place to be. Bridging loan books reached a record high in Q1 2024, growing to £8.1bn, according to the latest data from the Bridging & Development Lenders Association (BDLA). Figures from members show an increase in the size of bridging loan books in the first quarter of 2024, having also risen by 6.8% in the final quarter of 2023.

With statistics like these, it is probably unsurprising that there is so much interest from external funders looking for vehicles through which to originate.

Test of appetite The demand for short-term funding is showing no signs of easing, and that is the ultimate test of appetite for potential new lenders. Funders looking to have a presence here will be studying all possible scenarios, positive and negative, on which to base their judgements. They will be fully aware of all the aspects over which they have li le or no control, such as the world economy or the a er-effects of Covid-19. However, while there is still relative uncertainty surrounding the future, it does not seem to have dampened enthusiasm for the sector.

To be a success as a start-up in this market requires more than just good products and keen rates.

Expertise in the sector, particularly one as competitive as ours, is a vital ingredient for success. Experience in underwriting, credit and compliance issues are a given. The key personnel that any new lender will need are

those with strong interpersonal skills who can demonstrate that they have a recent track record of building new business. They will have extensive knowledge of the market and its most important players, because the ba leground is all about distribution.

In our industry, being able to leverage existing successful business relationships is vital to building a strong base for new business.

To be a success as a start-up in this market requires more than just good products and keen rates. Expertise in the sector... is a vital ingredient for success” Nevertheless, there are other factors that will affect continuing growth.

First is the enthusiasm of external funders to support the sector.

Currently, appetite is very robust.

Funders have their pick of existing and potential distributors, and will look at the experience and expertise of their teams as a sign of how successful they are likely to be. However, as we have seen too many times in the past, external funders can become fair-weather friends, with criteria changing overnight, or products withdrawn with li le or no notice.

There were a number of lenders that relied on private funding, and their advantage was in the ability to continue lending undisturbed, while their larger corporate-funded peers

NARINDER KHATTOARE is CEO at Kuflink

struggled to maintain service when adverse conditions struck – Covid-19 being the most recent.

Kuflink is a rarity among lenders by having a blend of corporate funders and private investors through its peerto-peer (P2P) platform. In our sector, larger P2P platforms have pulled out of retail funding from private investors, claiming that the regulatory rules make it uneconomical for them to continue. Kuflink, however, continues to provide investors with a solid return, as well as having two different but complementary funding sources available, making us a strong choice for the intermediary market.

New lenders face a huge task in developing sufficient traction to survive and thrive.

Criteria shaving In a competitive rate environment with so many lenders to choose from, there has been a tendency among some lenders to chase rates down to a ract generalist mortgage brokers who are used to an ‘only the lowest rates will do’ scenario in the first charge residential market.

Once the rate game has played out, the a ention will switch to criteria, and we all know where that leads.

Even if external funders are willing to shave their margin to be competitive, they will definitely baulk at any a empts to water down criteria, where they will be the ultimate losers.

As we have seen already, when a shock comes along, outside funders will continue to keep an especially close eye on their lender partners as they won’t want to be the one still standing when the music stops. ● August 2024 | The Intermediary

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Meet The BDM Together

The Intermediary speaks with Kara Williams, intermediary relationship manager at Together How and why did you become a BDM? I originally became a BDM as I wanted to work with the broker community to make a real difference to our partners at Together. As a young, career-focused individual, I have carried out several intermediary-focused roles at Together, however my goal was always to become a part of the fieldbased sales team.

The role is exciting, fast-paced and varied, so no day is ever the same.

You are constantly being tested, 36

The Intermediary | August 2024

which drives me to improve myself and my skills.

I love to see my accounts’ performance improve and grow as I work with them, not just in terms of lending volume, but also quality and efficiency – ultimately benefitting the client.

What brought you to Together?

Together is a lender long established in the industry, and based in the heart of where I am from. Working in financial services was a long held ambition of mine, and when the

opportunity arose to work with such a successful business, I knew it was for me.

Despite our size, we really do still have a ‘family feel’, which is a big draw. I was also attracted by the amazing and varied career prospects.

It has allowed me build a successful career with an amazing business.

What makes Together stand out?

Based on 50 years of trading, Together has the knowledge and experience needed to understand

MEET THE BDM

the finance market, and has played an integral part in the success of the UK’s economy over many decades.

We’re a lender based on relationships; our approach is always client-focused, searching for the right solution for any circumstances and delivering exceptional customer service.

Over the past few decades we have faced many challenges, such as the Credit Crunch, Brexit, Covid-19, the conflict in the Ukraine and the miniBudget, but Together has remained committed to its partners, working together to support our clients no matter what the global economy throws at us.

What are the challenges facing BDMs right now?

Our biggest challenge is time. The world has become ‘instant’ where we all expect everything immediately in every walk of life, and as a result the working day gets longer.

Unfortunately, this can sometimes make achieving a good work-life balance difficult.

The days pass in a blink, as you can be on the phone for 10 hours straight assisting brokers and their clients, meaning late nights and early mornings become a regular occurrence.

Sometimes it’s a lifestyle as well as a job!

What are the opportunities for BDMs? The opportunities for a BDM are huge, as the broker market grows year-on-year. In the 10 years I have been at Together, I have witnessed massive growth, and also a sharp increase in the quality of applications, with brokers very much becoming the modern day bank manager.

The best BDMs are the ones who add value. We’re not just there to dispense information, we are here to make a real difference to our partners and clients.

How do you work with brokers to ensure the best outcomes for borrowers?

I like to add value to the service provided to brokers. I pride myself on rolling up my sleeves and getting stuck in. It’s vital I keep my brokers fully updated on our products, rates and services, but it’s after this that the real work begins.

At times, my role feels like its 24/7, with brokers calling early in the morning and late at night, but they have a stressful role and I like to be an integral part of their business and help them achieve success.

I always remember that there is a client at the heart of every transaction, and our ultimate goal is to deliver the right solution, on time and with the smoothest possible journey for all parties.

What advice would you give potential borrowers in the current climate?

My advice would be first to ensure that they are prepared, and have all their information ready in a professional manner to best present themselves to a lender. They must clearly show that they can service any borrowing required, what security they have to offer, and their ability and track record in their chosen sector.

Second, as the market is so busy and at times confusing, it’s imperative to seek out a quality broker who can assess their needs, understand their ambitions and goals and work with them to secure the best funding solutions, not only today but moving forwards.

Finally, they must look at the market. We have a new Government, and this may bring change.

Hopefully we will see the base rate continue to drop now that inflation appears to be under control, meaning mortgages should prove more affordable, but clients must also allow for any future rate rises.

The opportunities for a BDM are huge, as the broker market grows year-on-year.

In the 10 years I have been at Together, I have witnessed massive growth, and also a sharp increase in the quality of applications, with brokers very much becoming the modern day bank manager” Make sure to correctly stress test any borrowing to ensure it’s affordable for you, both today and in the future. ●

Together

Established in 2010 Products • First charge and second charge • Regulated bridging • CBTL • Unregulated bridging • BTL mortgages • Commercial term mortgages • Homeowner business loans • Development finance Contact details kara.williams@togethermoney.com 07542863750

August 2024 | The Intermediary

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S P E C I A L I S T F I NA NC E Opinion

Don’t miss any opportunities this summer

A

lthough summer is synonymous with beach holidays, for property investors it can present a headache when trying to get a deal across the line.

Whether it’s a commercial or residential purchase, from solicitors to agents, there are fewer people working in summer, all amid pent-up demand for property.

This is where specialists like Charleston Financial Services Limited come into play to provide support, and sometimes this can involve working with bridging loan providers like Greenfield Bridging.

Commercial challenges Charleston Financial Services focuses on specialist markets such as buy-tolet (BTL), short-term funding, and houses in multiple occupation (HMOs) – working in the complex lending market, which covers markets and customers that your average broker wouldn’t pick up.

This allows Charleston to cater for investors looking for quick and efficient financing solutions tailored to standard and non-standard property investments.

Understanding the nuances of the specialist lending environment and having experience and relationships with bridging lenders can help get a deal over the line.

Bridging finance is a key tool for investors who need quick access to funds. During our 16 years of trading, we have covered pre y much every scenario you can imagine, so very quickly we are able to come up with a solution and strategy to ensure that people get to where they need to get to as quickly as possible. This expertise is crucial for investors who

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The Intermediary | August 2024

ANDREW BLACKWELL is head of sales at Charleston Financial Services

need to act swi ly, particularly in competitive markets.

Education and service It is important to provide clear explanations and educate clients about the realities of bridging finance.

Our job is to take people away from the shiny headline and bring them to the lender that will get the job done.

Charleston’s approach ensures that clients understand the full picture, including potential costs and timeframes, allowing them to make informed decisions.

Bridging loans are versatile and can be used in various situations, including chain-breaks, refurbishment and auction purchases, to name a few. In the current market, a lot of investors are looking to maximise capital value appreciation at the start of a transaction, where someone’s going to have to invest a bit of time and money into the property.

So, they need a short-term loan to facilitate that, and quite o en they will look to us to then provide a term mortgage if they are to retain the property, in order to benefit from the value added.

One barrier to using bridging finance is the perception that it is prohibitively expensive. There is a perception among people who don’t know the market well that bridging is incredibly expensive, but the cost differential isn’t as dramatic now.

With residential mortgage rates closer to 4% and 5%, the difference between traditional mortgages and bridging rates has narrowed, making bridging a more viable option for many.

Single point of contact Charleston Financial Services prides itself on providing exceptional service.

Having a point of contact that you can speak to at any given time is key to everything when dealing with bridging lenders.

This commitment to accessibility and responsiveness ensures clients receive timely support and guidance throughout the lending process.

A standout partner in this regard is Greenfield Bridging, known for providing a single point of contact to support clients throughout its bridging loan journey.

You’ve got a single point of contact that you can pick up the phone to, who is almost always available and certainly comes back to you if they’re not, to provide the sort of instant feedback that you need.

Summer opportunities As we head into the holiday season, the property market can slow down, making it crucial to be prepared for any opportunities that arise, for example, auctions.

We always encourage people to try and get as far as possible before they get to an auction, this enables the customer to a end, ideally with a firm lending approval so that they can go in there with some real confidence.

Richard Keen, national sales manager at Greenfield Bridging, says: “By understanding the benefits and uses of bridging finance and partnering with Greenfield Bridging, brokers and investors can capitalise on this summer’s opportunities without le ing them slip through the net.

“Our BDMs are mandated as underwriters, which means a quick, qualified decision.” ●

L AT E R L I F E L E N D I NG Opinion

Providing greater stability on RIO mortgages

T

Demand for retirement interest-only (RIO) mortgages has been rising steadily

he increasing need for people to take mortgages into retirement, or to unlock cash from their properties, means that some form of later life lending is becoming a more familiar part of the homeowning journey.

As it o en does, the market is responding by offering a wider range of products designed to meet the increasingly varied needs and financial circumstances of customers.

Variety of options Whether someone is remortgaging because they haven’t been able to clear their home loan before retiring, or is seeking to unlock capital to support retirement income, pay off debts, help family members, renovate, or fund a lifestyle activity, there’s now a variety of options for them to consider.

While we’re seeing an increase in later life lending overall at Buckinghamshire Building Society – with a doubling of volumes between May and June alone – demand for retirement interest-only (RIO) mortgages specifically has been rising steadily over the past 12 to 18 months. RIOs were introduced as a

more affordable solution for older borrowers who want the security of a lifetime mortgage, but where the loan amount does not increase in size.

Because there’s a monthly interest payment to make, it suits those with a regular fixed income.

Latest UK Finance figures show an increase in the number of retirement interest-only mortgages advanced at the start of this year, with a value of £28m, which is up 16.7% compared to the same quarter in 2023.

Supporting that trend, Advice Wise also reported a 163% increase in the number of searches for RIO products in the first quarter of 2024.

This was part of a 139% increase in the overall number of searches on the platform for later life lending between December 2023 and early this year.

Keeping the market moving while protecting the financial security of homeowners is not just about providing a wider range of products though, it’s also about constantly reviewing and evolving existing products to make sure the conditions and criteria are right.

This means listening to feedback from intermediaries as to what’s working, what isn’t and where the gaps are.

CLAIRE ASKHAM is head of mortgage sales at Buckinghamshire Building Society

Brokers have been telling us that, while RIOs are a popular choice, borrowers now want more stability within that. In today’s changeable rate environment, there’s a clear preference for more structured repayment methods, particularly among later life applicants who are on a fixed monthly income.

Predictable payments They are seeking the security of stable, predictable payments, but finding a scarcity of fixed rate options in the retirement interest-only range.

We’ve had numerous requests from advisers for a fixed rate RIO option and have therefore introduced a new 5-year fix for those aged 55 and over. It’s available up to 60% loanto-value (LTV) for both purchase and remortgage purposes. There’s also a desktop valuation option for remortgage applications.

As always with applications to Buckinghamshire Building Society, cases are assessed on an individual basis and manually underwri en.

By responding to the demand with a 5-year fixed rate RIO, we aim to provide more financial stability and peace of mind for borrowers navigating the current challenges of the retirement years.

We always encourage advisers to let us know what their customers need, and will respond with new products or product changes where possible – this is how we can work together effectively to keep the market moving, and in the best interests of the borrower. ● August 2024 | The Intermediary

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S E C O N D C H A RG E Opinion

Time to be positive about second charge LAURA THOMAS is regional sales manager at Equifinance

I

The future of second charge lending is bright

t was easy to believe at the time that the world would never return to pre-Covid normality. The overall feeling of negativity wasn’t helped by domestic energy concerns and the financial uncertainty caused by the ongoing conflict in Ukraine, among other worries.

Perhaps it should be remembered that the ‘normality’ we all crave is our desire to go back in time. The past is always seen as a be er time, while the present and future are always more daunting because we don’t know what is going to happen.

Yet here we are three years on, a li le ba ered and bruised, but thankfully, with the need for property finance undiminished.

So, what about second charge lending? My take on the prospects for the second charge market is based on looking at the trends that are at work already this year, and my natural optimism, which stems from my experience of being involved with a successful leading lender for a larger number of years than I care to mention.

The conditions for a good year in the second charge space have been given a not inconsiderable boost by the strong finish to 2023 in terms of completions, and the pipeline built up in the last

40

The Intermediary | August 2024

quarter of that year. In anybody’s language, it provides a strong base from which to progress.

Figures from the Finance & Leasing Association (FLA) show in the first quarter of 2024 new business increased 14% by value and 8% by volume when compared to the first three months of 2023.

Another notable feature this year is the narrowing of the margin between first and second charge interest rates, which is making the second charge option more a ractive.

Seeking stability Along with the more usual requests for loan consolidation, we are seeing an increase in enquiries involving prime customers, which will surprise many. Roughly 70% of the second charge market is already made up of prime customers possessing high credit scores, good stable employment and disposable income.

Why have they come to a second charge solution? There are many reasons, but principally clients want to borrow money in the simplest way, without having to forfeit their existing mortgage rate by remortgaging to raise capital, or because early redemption penalties are too steep.

With up to 2.4 million fixed-rate deals expiring in the last six months

of this year, according to UK Finance, many will be forced to refinance at rates that bear li le resemblance to those they have been used to, even allowing for the lower rates beginning to emerge. Also, for those whose credit history has been compromised during the last few years, replacing like for like by product transfer might be more problematic. In addition, a new fixed rate mortgage, which might include a request to raise capital for home improvements, could be difficult.

Brokers will not only be facing calls to help clients transition to a new fixed rate, but for many, sums will need to be added to raise capital to extend or renovate. Mortgage lenders are going to be especially careful of extending extra funds given the cost of living increases, as well as any changes to credit status.

If first charge lenders are prepared to allow a like for like product transfer at the end of a fixed rate deal but not extra funds for home improvement, then the interest in second charge mortgages is going to rise.

In the wider capital raising sector, advisers are already telling us that they are aware remortgaging can no longer simply be a default choice for clients seeking to raise capital.

As I have stated before, recognition is growing that the Consumer Duty framework will begin to help accelerate greater consideration given to clients in assessing the best funding vehicle for capital raising.

2024 is already shaping up to be a strong for the sector. This will be driven more by those looking to revamp or extend. Second charge lending, which is faster and more flexible than first charge, will win more fans this year. ●

S E C O N D C H A RG E Opinion

Unlocking further growth in seconds

C

ustomer awareness of second charge loans in the UK remains relatively low compared to markets like the US and Canada, where such loans are more established.

To address this, a concerted educational effort by all market participants is required to ensure consumers are fully informed on lending scenarios and product specifics, and have access to all available financial tools.

Innovation and the development of new products is also crucial. For instance, in the US, home equity lines of credit (HELOCs) account for 70% of secured loan lending, providing consumers with greater flexibility to meet their long-term financial needs. The UK needs similar product development and awareness to unlock further growth.

Additionally, second charge lenders and brokers must significantly enhance the customer journey by

leveraging technology and processing improvements to reduce the time to funding. While consumers can typically secure personal loans within hours, secured lending o en takes weeks or even months, and improving the customer experience is essential for mass market adoption.

At Selina, we are focused on innovation and improving the endto-end experience in a bid to drive the second charge market forward by delivering be er customer outcomes and increasing access to this product type.

To do so, we have launched a USstyle HELOC product, and were first to market with an end-to-end paperless application process and pre-consent funding, offering customers access to funds in days, rather than weeks.

Amid the cost-of-living crisis, we have observed a higher proportion of second charge lending for debt consolidation due to the lower rates compared to personal loans or credit cards, helping borrowers reduce their monthly outgoings.

HUBERT FENWICK is CEO at Selina Finance

This is a valuable tool for homeowners as they navigate the new rate environment and manage their finances be er. As interest rates hopefully begin to fall, and if property prices continue to rise, we expect home improvements to become a major use case again, as consumers look to invest in their homes.

Furthermore, with the impending addition of VAT on private school fees, some parents are seeking ways to raise funds to pre-pay school fees, or using HELOC products to manage termly fee payments. This allows them to spread the cost of education over a longer period, ensuring they can secure the best education for their children.

Generally speaking, the use of seconds could be much larger if there was a higher awareness around these products, easier access, and more tailored products to customer needs. ●

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August 2024 | The Intermediary

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S E C O N D C H A RG E 12 Rounds

MATT TRISTRAM,, CO-FOUNDER AND DIRECTOR AT LOANS WAREHOUSE, AND BUSTER TOLFREE, DIRECTOR OF MORTGAGES AT UTB, GO HEAD-TO-HEAD ON KEY ISSUES AFFECTING THE FUTURE OF SECOND CHARGE

Pre-consent funding TOLFREE

and then – quite obstructively – there’s a few lenders that don’t. The whole system of consent needs to be looked at. I’m fully in favour of finding a way to bypass it.

At UTB we can condition offers for consent to follow, but putting the customer in breach of the terms and conditions (T&Cs) of their first mortgage is not in their best interests. There are lenders that generally do provide consent every time, but it’s a leap of faith to just say ‘don’t worry, they’ll probably do it’. You’re putting the customer in breach of the terms and conditions of their first charge, and that’s not consistent with Consumer Duty. To actually fund the deal without first charge consent? I don’t agree with that in any way.

TRISTRAM

TRISTRAM

The idea of consent for many years was just about money-making for high street lenders. 95% of lenders grant consent every single time, 42

The Intermediary | August 2024

System overhaul TOLFREE

Consent probably does need looking at, but it’s a slippery slope. If you’re turning a blind eye to consent, where else? They say they earn £50,000 a year, we don’t really need payslips.

It’s compromising your morals.

It is a bit archaic, yes, but there’s certain things that we shouldn’t compromise on in favour of getting a speedier process.

But you’ve got 10 to 15 years of history with the lenders, you know who will always grant consent. If we agree that the whole system is

flawed and outdated, the only way it’s ever going to be changed is if every lender just says no to those archaic things.

Consent restrictions TRISTRAM

For lenders that actually decline consent, the reasoning is often ignorant, based on rules that were made up 10 years ago – say, they won’t grant consent within the first 12 months of a mortgage, even if it’s just a remortgage. Mortgage lenders could club together and suddenly decide they’re going to stop doing it, which was rumoured years ago.

TOLFREE

Each lender understands the risk parameters of an application. You can’t stop the customer taking out unsecured credit, or getting ‘buy now, pay later’, but you can stop

S E C O N D C H A RG E 12 Rounds

them taking additional borrowing secured on their property. There’s an element here of risk mitigation.

Consumer Duty obligations TRISTRAM

Certain lenders won’t give consent unless for essential home improvements, others won’t if you’re above 65% loan-to-value (LTV). There are still some barbaric things out there, giving a blanket ‘no’, which supposedly you’re not allowed to do under Consumer Duty.

TOLFREE

One-year selfemployment TRISTRAM

More lenders are taking a single year’s accounts after the pandemic, but still need them to have been in business for several years.

Meanwhile, if you’re employed and you just started a new job, more often than not lenders are happy to lend. You’re trusting the person that employs them – who might be an entrepreneur who has only been in business for a year.

TOLFREE

They’ll wrap these mortgage loans up into a securitisation, committing to cap certain LTVs and risk features.

We’re arguing here over a technical point. It’s the technical breach of the T&Cs of the first charge. I still don’t think that’s right when all we’re doing is trying to shave off days.

I’d rather be ‘whiter than white’ and do the right thing than live in that bit of grey.

If someone has only been trading for one year, and you use that year’s accounts, that’s quite different to saying someone could have been trading for any number of years, but the lender will use the last tax year for income.

But the length of time the business has been trading is more about the experience of that person or that business in that sector – it’s not an income judgment.

TRISTRAM

TOLFREE

PTs and seconds The biggest growing market in mortgages is product transfers (PTs), while most secured loans are consolidations – just swapping debt for debt. For PTs, lenders are quite happy to do absolutely zero assessment other than checking you’re paying the mortgage correctly, but for consent, some of them want to do a full review.

TOLFREE

The difference here is that in one scenario, you’re not raising any more money. In the other scenario, you are.

With PTs you’re simply giving them a pound-for-pound remortgage. With second charges it has to have those checks and balances.

Judging income Using the last year means if you’ve got somebody whose business is growing, they get the benefit of that growing figure. If the business is reducing, you’re using the most risk averse number. People that don’t use the last year are sleepwalking into risk they don’t really understand.

At UTB, we want a minimum of two years trading, but we use the last year’s figures.

TRISTRAM

But you can only judge on the ‘there and then’. Take an employed person – you can see they’ve got a basic salary, but they might already be working their notice period to leave a month later. You can only assess

For PTs, lenders are quite happy to do absolutely zero assessment other than checking you’re paying the mortgage correctly” Matt Tristram

on what the income stands at that point. If using one year’s figures is taking the more risk averse number anyway, why do they need to be trading for that extra year?

Market innovation TOLFREE

We ditched application forms about four years ago, getting rid of anything with a wet signature where we could.

If you look at where we currently are, it’s much closer to the first mortgage world. Most lenders, certainly those of any notable size, are using biometric ID verification. There’s certain elements of the second charge market where we have really used technology to our advantage in a way that is far better than in the first charge. We’ve got automated decisioning, automated valuation models (AVMs), and biometric ID is something that we were quicker on than some first charge lenders. This also goes back to Consumer Duty – sludge processes don’t add value, it’s just putting up barriers.

TRISTRAM

It has taken a hell of a long time to get there with e-signatures and removing paper applications. No one really put their foot down to make the sort of changes needed.

E-signatures have been around for a hell of a time. In the last year, those barriers have come down, but it should have happened sooner. → August 2024 | The Intermediary

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S E C O N D C H A RG E 12 Rounds

New competition TRISTRAM

As a broker, we’re led by the lender.

Lenders have been too slow. That has changed in the past year, but that’s because of new entrants that don’t have the legacy systems.

TOLFREE

If you’re launching a new lender, but you’ve previously been involved with other lenders in this market, you had the opportunity to make these changes before. People didn’t want to make changes, because they were looking to their own future.

Everybody wants to improve things, but there is a job that’s got to be done. When you’re running a business and then trying to make those changes, you have to prioritise things. When you’re launching new with no legacy you have the time to think about doing things differently.

We can agree that new entrants stimulate change, and that raises the bar. But that stuff was happening anyway. Maybe it has happened a bit quicker, but we’ve never sat back and done nothing.

Best use of tech and data TOLFREE

There are some risks associated with a completely digital journey, because there’s no checks done on the e-mail address that you send the document to for the witness, they’re not geolocating to make sure that they’re in the same location. We aren’t quite there yet.

If we’re moving into a world where customers don’t sign anything, and they authorise everything digitally, we then have to ask ourselves what we are doing to prevent fraud. In a digital environment fraud can be quite sophisticated.

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The Intermediary | August June 2024 2024

TRISTRAM

It’s a good step forward within second charge. Biometric ID has effectively replaced the security call. It’s now becoming more commonplace, and it works.

UTB brought in biometric ID during the pandemic, using the NIVO app, maybe in the hope more people would use NIVO as well. But everyone’s gone their own way again.

One thing I would say is, with changes like this, what’s needed is more thought. So, when UTB introduced it, it was right at the end of an application. We would spend weeks getting all the information together. The lender then does all their work, and when they’re finally happy, they send out the biometric ID. It’s a great innovation, but it needs to be done at the start – nobody’s doing it right at the start.

TOLFREE

Initially we linked the biometric ID to the security check. We did do that too late. What we’ve now done is split the ID from security questions, and we send the biometric ID element earlier, at application.

Maybe we didn’t get it quite right day one. We did what we thought was right, and then have learned and improved it.

Old school practices TOLFREE

What a lot of those old school lenders do is the verbal security check. We do all of that when we issue their offer to them electronically, whereas others are making physical telephone calls to borrowers before advancing monies.

It’s so out of date, and you don’t see it in firsts or unsecured lending.

There’s a case for verbal checks where you’ve got vulnerable customers, or customers with specific needs, but in that middle 85% that go through the process smoothly, it’s laughable that telephone checks still exist.

Speed is a real factor in the lender product brokers recommend.

There’s a place for that, and if it’s a matter of weeks...yes that’s a clear differentiator” Buster Tolfree

TRISTRAM

This does fall back into lenders needing a kick. There were people having conversations even before UTB did it in 2020, but they’ve still not done it. No one gets around to just moving forward with innovation.

There’s so much more of it in firsts, but there’s still some dragging their heels for far too long.

Suggestions from the other side of the deal TRISTRAM

Lenders need to pick up the phone.

Remote access is great, but lenders are getting worse at picking up the phone, which you need to do to solve problems. Other than that, one thing I would ask for is more collaboration in terms of using the same forms of technology. It would be great for things to be more universal.

TOLFREE

Speed is a real factor in the lender product brokers recommend. There’s a place for that, and if it’s a matter of weeks versus days, yes that’s a clear differentiator. But some in the broker community place too much emphasis on small time differences, where there’s no real tangible impact to the customer, and this may result in a more expensive product that can cost hundreds or thousands more. All for a few days, why? ●

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B RO K E R B U S I N E S S Opinion

Good, bad or indifferent – reviews matter

JESS RUSHTON is head of business development at Smart Money People

trust 3 Build and credibility

When companies do respond to reviews, customers appreciate when they take the time to engage with them on a personal level. This level of transparency builds trust and credibility, enhancing the overall reputation of the brand and encouraging future interactions.

T

By actively engaging with feedback, companies demonstrate a commitment to customer satisfaction

his may not surprise you, but I am a person who leaves reviews. Coffee shops, restaurants, hotels, take-out deliveries, taxis – even my local pub got a review (five stars obviously). I like to applaud a job done well, but also, where there is room for improvement, I will provide constructive comments to help the business adapt.

Customer reviews play a crucial role in shaping brand perceptions and influencing purchasing decisions.

Research conducted by Smart Money People in October 2022 showed that more people use reviews to decide which financial products to use than asking an adviser. So, having visible customer feedback is particularly powerful in the financial sector.

For companies, it’s not enough to simply passively observe these reviews. Whether the feedback is positive or negative, responding to customer reviews demonstrates a commitment to customer satisfaction.

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The Intermediary | August 2024

Here’s five reasons why you should always respond to customer reviews.

customers you 1Show value their feedback

Responding to reviews sends a clear message that your company values customer feedback. It shows that you’re commi ed to listening to your customers, addressing their concerns, and continuously striving to improve their experience. This customercentric approach builds trust and confidence in your company.

Turn negative 2 experiences into positive ones

Negative reviews definitely aren’t all bad. They give companies the opportunity to learn, improve, and showcase their dedication to customer service. By responding promptly and professionally to negative feedback, your company can demonstrate a willingness to make things right. This is likely to leave a lasting impression on the customer.

insight 4Provide for improvement

Customer reviews are a valuable source of insight for companies looking to improve their products and services. By actively engaging with reviews, companies can gain valuable insights into customer preferences, pain points, and areas for improvement. The feedback provided in reviews can inform strategic decision-making and drive continuous improvement initiatives.

5

Enhance customer loyalty

When customers see that their feedback is being heard and acted upon, it enhances their loyalty to the brand. As a result, they’re more likely to continue doing business with the company and recommend it to others.

By actively engaging with customer feedback, companies can demonstrate their commitment to customer satisfaction. Adopting a proactive approach to customer engagement by responding to reviews is a powerful strategy for driving growth, positive relationships, and creating a strong and resilient brand presence. ●

B RO K E R B U S I N E S S Opinion

Over the top: Beyond success

W

e spend half our life training for success and the other half working hard to get it. But what do we do once we have reached the top? Sometimes clients ask, ‘is this it?’ They are no longer motivated by the next bonus, promotion or entrepreneurial success.

People are living longer, and living healthier. The prospect of retirement at 65 with the gold watch and a nice pension has li le appeal for active people, but their motivational drivers may have changed – material rewards or security may not be key motivators anymore.

A man once told me he had made all the money he could possibly need, and wanted to do something different.

I enthused about his opportunity to do something meaningful and enjoyable, but he replied that where he worked – one of the Big Four consultancies – partners died, on average, 18 months a er they retire. Off he marched, leaving me dumbstruck at the fatalism. Work hard and die when you stop. It doesn’t have to be like this. Younger generations are already challenging this view of life, career and success by increasing their mobility and embracing insecurity.

It is time to take stock and avoid the usual knee-jerk responses. Over the years, I’ve heard it all. ‘I’ll teach!’ Oh please don’t. ‘I’ll open a coffee shop!’ A whole different sort of stress. ‘I’ll get a cro in the Highlands!’ Midges and rain? You don’t want to do the same thing anymore, so you plump for something entirely different, without sufficient reflection.

The solution is to prepare proactively for this stage of our career. Companies must make way for younger talent, but many senior people feel they might just hang on in role instead of embarking on the great unknown. One US law firm talked

with White Water Group about 25% of partners having become ‘deadwood’ – not doing a lot of business, not being ambassadors or mentors, but a bloodbath to get them out or move them along.

This is relevant for entrepreneurs and owner-operators who have taken their business to a significant milestone and wonder what to do next, and also corporate executives or partners who have achieved all the early goals of their career and are marking time. For their sponsoring organisations, this is a way to supply appropriate and timely senior management development, and an effective risk management tool.

Do it yourself If this resonates with you, first, take stock of your career so far, listing all your successes. Notice the highs and lows, what you loved and what you had to get through. Build an identikit picture of the best life.

Take time to celebrate all you have achieved. You are the person who achieved all that. You are now giving yourself the chance to pivot and get some fresh ideas about the future.

Recognise the strengths you used to get where you are today. You are at your most engaged and least stressed when you get the opportunity to play to your strengths. This is about ge ing back to using those key a ributes in novel ways.

Check whether you are still able to use your key signature strengths daily in your current role. Are there tweaks you could make?

Delegate the stuff that gives you no joy and focus on the highlights – you’ve earned it!

Imagine you have been asked to write the story of your life. What would you want it to tell? What’s missing? What would give it all meaning?

Brainstorm a variety of options – more of the same, through to joining

AVERIL LEIMON is co-founder of The White Water Group

You are at your most engaged and least stressed when you get the opportunity to play to your strengths” the circus. Make it as varied a list as possible.

Test reality – speak to people, ask for work experience, serve a shi somewhere. There’s no shame in discovering that you would hate to do something you have always hankered a er.

Involve everyone with a vested interest – colleagues, family, friends.

Think through the consequences of your decisions and incorporate the rest of your life – family, hobbies, spirituality – in your next career stage.

Make a plan! It might be 20 years off, but there are qualifications you could get now that would give you insight. Then, you’re ready to take the first step.

The process is challenging. Aim for total clarity and enthusiasm about the next phase of your life, rather than slipping into ill thought through decisions. It helps you define, articulate and set in motion the next phase of your career and existence in a way that you maybe never fully considered the career you have followed so far. You will be a healthier person, with more energy and vitality.

Boredom and apathy will have disappeared from your life, even if you decide to remain exactly where you are. You will at least know why! ● August 2024 | The Intermediary

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B RO K E R B U S I N E S S Opinion

Let’s talk about mental health

T

he past four years have not been easy for anyone. The global pandemic, war in Ukraine and Gaza, the cost-of-living crisis and political instability have been very challenging for many people, and the reverberations continue to take a toll on mental health.

In the mortgage industry, difficult market conditions, exacting regulation and volatile rates have resulted in a very busy workforce, striving to find the best solutions for anxious customers, year a er year.

Working from home and the increased use of technology are double-edged swords – both can save us precious hours and help us use our time more productively, but many people feel that they are never out of work mode these days – always ‘on’ and available, while at the same time feeling an increased sense of isolation.

All of this adds up to a large amount of stress, which has impacted the mental health of many of our mortgage industry colleagues working at lenders, brokers and associated service firms.

Fortunately, the importance of our mental health is now acknowledged and publicly discussed. However, it is a delicate topic, and one which should be approached with sensitivity,

and some people are still simply not comfortable talking about their own mental health. For some, there is still a fear that admi ing to having problems will be seen as a sign of weakness – detrimental to perceived ability and career progression. But we have come a long way in a relatively short space of time.

An open pledge Mental health was not afforded the same gravity as physical health until the Health and Social Care Act 2012 enshrined in law ‘equivalent duties’ in relation to both. 20 years ago, many health insurers declined to cover a lot of the most common types of mental health issues. Last year, 24% of the claims Aviva paid out were related to mental health.

It is great that mental health is out in the open, its importance is acknowledged, and that much of the stigma a ached to the term has largely been je isoned. What is not great is the proportion of people in the mortgage market who feel their own mental health is suffering, and do not feel sufficiently supported.

Many readers will know of the Mortgage Industry Mental Health Charter (MIMHC), founded by half a dozen lender and adviser firms in October 2021, led by Jason Berry of Crystal Specialist Finance.

The reasons cited for broker stress are numerous, from economic challenges to client demands

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The Intermediary | August 2024

KATE DAVIES is executive director at the Intermediary Mortgage Lenders Association (IMLA)

The charter now has 80 signatories, who pledge to have a mental health focus within their organisation and commit to keep conversations going so people affected do not suffer in silence.

MIMHC recently carried out its third annual survey of brokers’ wellbeing, which found that many are working very long hours – 49% work 45 to 60 hours a week, and 13% more than 60 – underslept and stressed.

When it comes to their own mental health, 37% describe theirs as just ‘satisfactory’, 18% say ‘poor’, while a worrying 3% believe their mental health is ‘of concern’.

Disappointingly, only 52% of respondents say their company participates in mental health or wellbeing initiatives or strategies, a fall of 2% from last year.

The reasons cited for broker stress were numerous, ranging from the economic environment to client demands, navigating product withdrawals to lack of resources, Consumer Duty pressures to reduced income.

Broker and lender firms themselves may not be able to fix all of these issues, but it is important they are aware. Nevertheless, all firms should be able to foster and encourage greater communication. In the words of one respondent, “the only way mental health can improve is if people at all levels are provided space, time and opportunity to talk and connect in a safe environment.”

As an industry, we should aim to provide this as a bare minimum - our collective mental health may depend on it. ●

T E C H NO L O GY Opinion

All change but mind the gaps

I

am genuinely pleased to say that the mortgage industry – far too o en maligned for being behind the technology curve – is adopting and adapting with enthusiasm.

We are now more than a month into our rigorous research with lenders of all shapes and sizes across the market which will inform this year’s mortgage efficiency survey, which we have been producing for over a decade.

We have learned that there has been something of a sea-change over the past 12 months since we last carried out our extensive interviews.

Year in, year out, lenders tell us there is widespread acknowledgement that investment into upgrading lending systems, origination platforms, functionality and flexibility is needed to maintain competitive advantage. In the past, however, the translation of that knowledge into action has been less widespread.

Interviews this year suggest a marked change in this behaviour, with numerous lenders now undergoing transformation programmes. This is game-changing. There are lenders still operating today on technology so ware wri en more than 40 years ago.

To be clear, they’re not operating only on those systems, but the jumbled patchwork of technology that underpins some of the larger and older banks’ and building societies’ origination and management systems is, in some cases, compromising.

The case for change has long been clear, nowhere more so than at the front end. Researchers at global consultancy firm Zendesk published research earlier this year that showed banks which consistently optimise the customer experience grow more than three-times faster than those that don’t.

Reduced friction when it comes to applications and customer experience

makes an enormous difference to retention. At a time when margins are under pressure and customer affordability is stretched, that ma ers.

According to the Zendesk Customer Experience Trends Report 2023, three quarters of customers want immediate service from their bank, 70% expect anyone they interact with to have full context of their personal case and 62% think “experiences should flow naturally between both physical and digital spaces.”

Investment in technology While these observations are unlikely to come as a surprise, it’s sometimes too easy to overlook the fact that each of us working in the mortgage industry is also a consumer with similar expectations. But we are.

According to estimates from the Intermediary Mortgage Lenders Association (IMLA), nine out of 10 UK mortgages in 2024 are now wri en via a broker. The reliance lenders have on the intermediary channel is huge.

Over the past year we have begun to see a meaningful rise in the number of lenders recognising that investment in technology platforms that make case management smoother for brokers is crucial to their survival.

Interestingly, the appetite to adopt new, fit-for-purpose technology and systems has hit the market at speed.

To the extent it can be called traditional, lenders have been focused mainly on improving their digital capabilities in direct-to-consumer channels so far. But increased investment in intermediary-focused service is now in play.

Progress hasn’t stopped there, however. From our research, it seems that lenders are also now looking at overhauling post-application processes to inject efficiencies using smarter technologies into the backend of their operations, too.

Ongoing service and customer delivery is being given the same level

STEVE CARRUTHERS is business development director at Iress

of priority as front-end customer experience. This reflects Consumer Duty concerns about legacy systems.

Speaking at a KPMG event in February, Sheldon Mills, executive director for consumers and competition at the Financial Conduct Authority (FCA), was clear about the regulator’s expectations.

“There may be gaps in the data you hold from legacy systems, for example,” he said. “We know you may not have every answer. But you need to have a plan for how you will produce one, and how your firm will evidence that it is delivering good outcomes for customers who hold closed products.”

In the mortgage market, this most obviously relates to those borrowers who have defaulted onto a standard variable rate (SVR). Again, the FCA has been clear, with Mills saying: “We know some closed products may offer poor value.

“In some cases, customers in legacy products might pay higher charges than they would for open products, where firms are competing for new business…In all situations firms must assess and be able to demonstrate that their closed products provide fair value to customers…Firms should be confident that they don’t exploit consumers’ lack of knowledge or behavioural biases.”

The case for investing in systems that not only manage client accounts efficiently, but also flag issues which could constitute a breach of the Consumer Duty is no longer a nice-tohave. It’s a need-to-survive. ● August 2024 | The Intermediary

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T E C H NO L O GY Opinion

Embracing datadriven decisionmaking

MATTHEW CUMBER is managing director at Countrywide Surveying Services

By leveraging this information, lenders can then better assess the risk associated with an individual property”

D

By continuously monitoring and analysing property data, lenders and valuers can identify potential issues

ata has long been recognised as a crucial factor in allowing us to learn valuable lessons from the past, and at times, in predicting future outcomes.

In our rapidly changing world, the importance continues to rise as data enables businesses of differing sizes and scales to quickly understand what strategies are effective, and just as importantly, which ones are not.

For surveying firms, lenders and mortgage advisers alike, the ability to access, analyse and harness the power of accurate and comprehensive data is not just an advantage but a necessity in meeting the needs of our customers. This may incorporate individual efforts to do so, but there is also a bigger picture to keep in mind when it comes to making appropriate and sustainable progress to be er support and advance the wider homebuying process.

Embarking on a more collaborative approach to data is vital in helping to accelerate what remains an o en

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The Intermediary | August 2024

archaic process, and the more we can engage in meaningful discussion between all links in the buying, selling, lending and borrowing chain, the be er for all concerned.

A key player in advocating data quality and availability is the Open Property Data Alliance (OPDA).

The OPDA’s efforts to highlight data issues and push for transparency and accessibility across the homebuying and selling process have been instrumental in bringing concerns to the forefront. Its ongoing work will help ensure that the industry has access to the most reliable and up-todate information, which is essential for accurate decision-making now and in the future. A er all, being datadriven has its clear benefits.

Risk factors The integration of data in decisionmaking processes allows for a more proactive approach to risk management. By continuously monitoring and analysing property data, lenders and valuers can identify potential issues before they escalate.

For instance, understanding local risk factors such flooding, ground stability, landfill sites, coastal erosion, or proximity to power lines can inform more strategic decisionmaking and risk mitigation strategies.

This isn’t so much about the digitisation of the valuation process, it’s about arming surveyors with trusted data which can guide them in providing information which enables them to know more about the property at the point of valuation than ever before.

By leveraging this information, lenders can be er assess the risk associated with an individual property in a certain location, and determine the necessity of a physical inspection based on their specific criteria.

As the industry continues to evolve, the reliance on high-quality data will only rise, as this will enable more efficient, accurate, and customercentric outcomes.

By embracing data-driven decisionmaking, the surveying sector and the wider mortgage industry can be er serve its clients and navigate the ever-rising complexities a ached to what is fast becoming an increasingly complex property market. ●

T E C H NO L O GY Opinion

Good tech underpins better service and outcomes

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s a building society, we exist to help people own their own home – which we’ve been doing successfully since 1863. While the world has transformed since we first began taking deposits, and the pace of change continues to accelerate, we have constantly evolved, ensuring we are well-positioned to keep delivering on our purpose and help as many people as we can achieve their homebuying ambitions.

In April, finance app Moneyhub published a report: ‘Digitise or die: a call to arms for building societies’.

At the Building Societies Association (BSA) annual conference in May, top billing was given to the question of how the mutual sector keeps pace with the constantly evolving digital economy.

Moneyhub’s research found that almost half of building society customers reported difficulties engaging with their services, with digital experience a frequent pain point. It’s stark – though not a challenge that the industry isn’t acutely aware of.

How we serve customers is not just about a smoother journey; the entire industry is shi ing towards understanding customers and their needs. The Financial Conduct Authority’s (FCA) Consumer Duty is 12 months in, with its implementation for existing and closed products and services due on 31st July. Good consumer outcomes are the objective.

The strategy to achieve it relies heavily on using customer data much more effectively than the industry has done in the past. Technology underpins both.

The challenge for most mutuals, which traditionally serve those

parts of the market that fall outside the mainstream focus of the big six lenders, is delivering speed and certainty for customers without losing sight of that.

There is also the need to manage unpredictable events quickly and responsibly, so customers aren’t le paying the price. As the abrupt announcement of the Stamp Duty holiday during the pandemic, and then former Prime Minister Liz Truss’ mini-Budget, demonstrated, lenders’ ability to respond to sudden, significant market events with speed and accuracy is no longer a nice-tohave. It’s necessary.

Changing demands At Newcastle Building Society, we’ve prided ourselves on our customer service throughout our 160-year history. How we’ve delivered that has changed as the demands of the market have shi ed, and over the past 10 years, they’ve shi ed considerably.

While Moneyhub’s report focused on consumer engagement with mutual lenders across the UK, 90% of our mortgage borrowers come to us through our broker partners.

We’ve always had positive feedback from our intermediary partners, particularly when it comes to having a common-sense approach to underwriting, access to people, and an innovative a itude when it comes to offering products designed to support borrowers who don’t fit mainstream lending criteria.

Now, I am very pleased to say that extends to our own digital offering.

We’ve invested significant time, money, and resource into building a digital offering that works for brokers, and in June, we rolled it out nationally. It was because of the strength of our relationships in the

MICHAEL CONVILLE is chief customer officer at Newcastle Building Society

intermediary market that we built it in partnership with brokers. The response has been overwhelming.

Brokers have told us it’s “up there with the best mortgage systems,” “the easiest application I’ve submi ed,” “very clear, simple, and fast to use,” and “one of the easiest systems to navigate and use.”

More than 2,000 brokers used the system in the first four weeks. 100% of those we asked said the new system is ‘be er or substantially be er’ than our previous system. 100% said processing applications from decision in principle (DIP) through to full mortgage application (FMA) takes ‘less or substantially less’ time than in our previous system. 98% of respondents say that our new system is the same or be er than other lenders’ systems.

What’s more, embracing new technologies has freed up our underwriters to focus on what they do best: providing expert support and a common sense approach to broker’s complex cases.

This blend of digital efficiency and human expertise has transformed the broker experience as well as our ability to help our customers become homeowners.

In June, 70% of DIPs were auto accepted, 66% of applications were offered in fewer than 10 days, and 39% of applications were offered in fewer than five days.

I can’t overstate how proud we are that we’ve been able to support so many more would-be homeowners in achieving their dreams. Without our broker partners, we wouldn’t have managed it with such success.

So, thank you. The world of finance is constantly changing, and we are changing with it. ● August 2024 | The Intermediary

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P RO T E C T I O N Opinion

Driving growth in a heavily regulated environment

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he cost of regulation for intermediaries, especially small independent firms, is at an all-time high.

According to the British Insurance Brokers Association (BIBA), direct regulatory costs for brokers are currently 40% higher than they were five years ago.

BIBA’s 2024 manifesto, entitled ‘Managing Risk for Growth and Economic Security’ calls on the Financial Conduct Authority (FCA) to create and oversee a regulatory environment that encourages growth and competitiveness.

It highlights the “disproportionate burden” and the damaging resource and cost impact of the current regulatory reporting approach.

Overall, direct and indirect costs as a percentage of fees and commission currently stand at 45% – the highest in Europe, and a burden significantly higher than that experienced by counterparts in other countries around the world.

Add to this rising inflation, a hard market, the limits insurers are pu ing on volumes, and the rising costs associated with HR, accounting, marketing, your own insurance costs and IT, and it’s no surprise to hear that many intermediaries are exiting the market and stating disproportionate regulation as a primary reason.

Of course, regulation plays a vital role in maintaining a healthy insurance ecosystem, but simply staying on top of regulation can be challenging. One look at BIBA’s regulation updates page and it’s immediately obvious how onerous a task this can be, especially for smaller independent intermediaries.

Add to this a new Government in power, and therefore the potential for

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a ra of changes and amendments to current legislation, as well as the postBrexit Future Regulatory Framework which continues to evolve at pace, and it is fair to assume that intermediaries can expect a range of new reforms in the coming months and years.

Limiting the impact Intermediaries can look to new ways to drive growth when times are tough.

Here are three key opportunities:

1 Upsell and cross-sell

Maximise your existing client base and general insurance (GI) income.

Selling to existing customers has always been one of the most effective, and easiest, ways to increase your revenue and profitability.

According to marketing specialists Hubspot, the probability of selling to a new prospect is 5% to 20%, while the probability of selling to an existing customer is 60% to 70%. It’s more cost effective, too. It is five to 25-times more expensive to acquire new customers than it is to grow revenue from existing ones.

Cultivating your current customer base through upselling and crossselling will perhaps offer the truest opportunity to drive efficient and sustainable long-term success in the current environment, and offset the cost of regulation.

2 Diversify

Another opportunity is to diversify into new markets and niche areas to ensure you meet the needs of an increasingly complex and challenging client base. Ask yourself: am I maximising my current position?

You no doubt have many clients with complex financial needs, so it’s prudent, therefore, to assume that these clients also have a range of GI

GEOFF HALL is chairman at Berkeley Alexander

Cultivating your current customer base through upselling and cross-selling will perhaps offer the truest opportunity to drive efficient and sustainable long-term success in the current environment” requirements that you can assist with.

This is particularly true of specialist mortgage clients, many of whom will no doubt have a requirement for nonstandard GI protection.

3 Share the burden

Finally, you can reduce the impact by increasing referrals to your GI provider.

Not only can they assist you with cross-selling, upselling, and supporting the needs of a more diversified customer base, but they can also share the administrative and regulatory burden, thereby directly reducing the cost.

Don’t let the impact of regulation limit your potential for growth. GI providers are actively working to support the independent intermediary market by helping identify new opportunities that drive growth and revenue. ●

P RO T E C T I O N Opinion

Protecting the interests of all

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sk pre y much any adviser what they think about the principles that sit beneath the Financial Conduct Authority’s (FCA) Consumer Duty rules, and you’ll likely get resounding support.

In our experience, 99.9% of mortgage intermediaries care deeply about their clients. The nature of the business of mortgage broking is to assist, support and ultimately deliver clients the reality of owning their own home and the comfort of knowing they can afford it.

Good advice makes or breaks a firm, and most rely on clients referring family or friends to their adviser following a positive experience.

There is a side to the duty rules that is important to focus on just as heavily as giving the best advice to a client based on their circumstances today.

The regulator’s stated intention is that the Consumer Duty sets a higher, clearer standard by requiring firms to ensure their products and services are fit for purpose and offer fair value and to help consumers make effective choices or act in their interests.

By focusing on outcomes, the FCA argues, the duty will help to ensure that the level of consumer

protection is appropriate both for the environment in which consumers currently transact and for those in which they will transact in the future.

LISA MARTIN is development director at LSL Financial Services

Future consequences The explicit reference to the future may seem challenging to fulfil – a er all, who can truthfully say they can foresee what’s to come years down the line. It would be restrictive to view it as just that, however; the regulator is not asking anyone to predict the future.

It is asking advisers to make sure that customers consider the consequences of their financial decisions today and how they could impact on them down the line.

In the world of investing, that might mean advising a client about to retire against pu ing all their savings into a high-risk stock. When it comes to mortgages, the obvious example is protecting against the risk of financial difficulties in the future. What adviser would want on their conscience the knowledge that a client lost their job or life, leaving a surviving partner with the burden of repaying a mortgage they can no longer afford?

Most of the mortgage industry is alive to the value of protection for clients already – no broker should be

Income protection, accident, sickness and unemployment and critical illness cover can all benefit clients

Under the Consumer Duty rules, there is a strong argument that the conversation around protection should be much broader” advising a client to take on mortgage debt without at least asking whether they have life insurance in place.

Under the Consumer Duty rules, there is a strong argument that the conversation around protection should be much broader than this.

Knowing about income protection, accident, sickness and unemployment cover and critical illness cover are all products which would benefit clients and help them to make be er financial decisions – even if they choose not to take a policy out.

Equally, being made aware of the different levels of survey available and the varying degrees of information they afford could save clients tens of thousands of pounds in the long run.

Doing the right thing is an opportunity, and there are many ways to up the level of diligence that make regulatory and commercial sense. It is not just about making sure what you do is right now, but thinking about how it might evolve in the future.

Protection, in its many forms, should be part of that process – even if it is ultimately shunned by the borrower – where ‘foreseeable harm’ is a very real possibility. ● August 2024 | The Intermediary

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Q&A

Paymentshield

The Intermediary sits down with Louise Pengelly, proposition director at Paymentshield to hear about the latest Adviser Survey Looking at the most recent Adviser Survey, what are the headline stats?

There are three or four areas that are worth focusing on. First, for the fourth year in a row, our advisers told us that they are missing fewer opportunities to talk about general insurance (GI).

We’ve been passionate about GI for years. That is our reason for being, and so we’ve been working with our adviser partners to talk about why it’s important to offer it to customers. What we’re seeing every year is that advisers are offering it more. For the first time, fewer than half are saying they miss opportunities. An important finding which goes alongside that is that advisers tell us that GI is becoming a more important part of their business, alongside their other products. More than 10% of companies said that GI was actually their fastest growing area. When you consider that these are primarily mortgage advisers – so GI is a secondary product – this is really positive.

The finding I think is most interesting from a consumer perspective is that 53% of respondents told us their customers were more likely to want advice than last year. That’s key, because it means there is a real push from consumers, for whom advice is really important.

They understand that home insurance is an important product, particularly at the early stages of their homeownership journey, even if it’s something they don’t know much about.

What is driving that increased awareness?

There are a number of different factors. Advisers are recognising that it’s important, and are therefore talking about it more, setting that thought up with customers.

There will always be a portion of borrowers for whom this advice is highly important, particularly people like first-time buyers who don’t have experience of home insurance.

Somebody giving them advice will be very much valued.

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There are economic factors as well. In a market where everything is going up in price, it becomes even more important to make sure that your home insurance really is fit for purpose – that it will cover the things you think it should – because the cost of replacing them could well be more than it was previously.

On the adviser side, Consumer Duty is definitely a factor. For our adviser partners, they’ve long since been focused on providing a really good service and making sure that customers get really good outcomes. Consumer Duty is just a reinforcement of that. That has encouraged advisers to reconsider GI. Finally, it’s about the improvement in referral services. A lot of companies, including ourselves, have developed their referral options for advisers.

For some advisers, selling GI themselves is a key part of what they do, and they’re comfortable with that. For other advice businesses, this might not suit them. For example, we’ve gone through some quite difficult economic times, and advisers have had to deal with products being withdrawn, so they’ve focused on getting the mortgages in place.

For some, having the bandwidth to do GI could be really challenging. The introduction of referral services in that context will be one of the reasons that GI is growing.

42% said referral could result in more income, why is that not even higher?

There is a level of receptiveness towards referrals, and yet when you probe into it, there isn’t a full appreciation yet of all the benefits. There is absolutely more work for the industry to do to make sure people LOUISE PENGELLY

Q&A

can see those benefits. There are many benefits to referral, because if you’ve got an adviser for whom selling GI themselves doesn’t suit their business, it can still provide that continuity of advice. There is more for us to do to make sure that we get that message out there.

What if advisers are reluctant to ‘give up’ their hard-earned clients?

We fully understand that, because when you think about the nature of a lot of these businesses, people have built them from scratch and they’re very protective. They’re very proud – and rightly so – of the customer service that they provide.

So, they want to make sure that their customer is being really well looked after.

It makes sense, therefore, that there would be a reluctance to potentially pass that customer on to somebody else. What if you pass that customer on and they make a hash of it? That could tarnish your reputation.

What I would say to advisers in that context is that we are a partnerships business. We exist purely to look after the needs of our partners.

We absolutely know that when we talk to one of your customers, we’re an extension of you, and we’ve got to protect your interests. We’ve got to make sure that we give the sort of customer service that you would be proud of.

When we built our referral offering, we very much put transparency and visibility front and centre. There are dashboards that will tell advisers exactly where their customer is at in the journey.

The approach we take is really about customer service and advice. We provide a really high level of training, because we want to make sure that we’re looking after your customer properly.

Is there still an issue where clients fail to remember the GI chat?

8% said that the main thing stopping them having a GI conversation was that they didn’t want to overwhelm the client. So potentially, an adviser has mentioned it, but the client has so much else to think about, they’ve missed it.

We have lots of information and support available to our advisers, ranging from help with objection handling, to webinars on various topics. We’ve got our GI Academy, which is CPD accredited training that advisers can use. We are always willing to talk to advisers about the best way of introducing GI, the best time to introduce it, and how best to have that conversation.

For example, if the customer already has a property they should have an existing policy, so asking for a copy will open the door to talk about the levels of cover and what they need, then either giving them a quote or referring them.

When advisers are talking to customers about what they are going to do for them around their mortgage, we recommend sharing that a part of their job is not just about helping clients get their dream home, but helping them stay there. This means ensuring they have the right protection, which includes good quality home insurance.

94% agreed discussing GI was important under Consumer Duty, so why are people still missing out?

Time and bandwidth will absolutely be an issue.

Price perception also. More advisers are feeling like, as this has become a more price-focused market, they can’t compete with that.

But when prices are going up, the value of advice becomes even more invaluable – making sure that people are getting the cover they need, because potentially they won’t have money for unexpected surprises. The consumer potentially paying that little bit extra for insurance might be something they thank you for further down the line.

Advisers also find it harder to sell on remortgage and product transfers, because the customer will have an incumbent policy. That may explain much of the gap, because typically advisers are offering to some but not all. It’s often those customers they’re not offering to.

Obviously, we can help with how best to have some of those conversations; having proper cover in place and making sure that cover is fit for purpose is important for everybody.

Why is it important to conduct this kind of long-term trend analysis?

This is a huge piece of work that we do every year, and it’s invaluable.

We are a partnerships business, and we see ourselves as an extension of the adviser. It is crucial that we understand the challenges that advisers are facing, what’s important to them, what are they worried about – their problems are our problems.

We need to know what’s stopping them from doing GI business, and what would help them to do more, if we’re going to be able to provide solutions for them. ● August 2024 | The Intermediary

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P RO T E C T I O N Opinion

Going all in on business protection

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s advisers, we’re constantly reminded to make protection a priority – especially now, with Consumer Duty. But despite the fact that many of us are self-employed, it’s surprising that business protection isn’t more of a priority too.

Just a couple of years ago, there were around 100 advisers licenced to sell business protection, and more than five million small to medium enterprises (SMEs). With my own firm Ginger Finance – which I started last year with Just Mortgages – I looked at that and thought, ‘nobody I know talks about this with business owners’. While this is improving, it’s still hugely underserved and growing in demand.

The pandemic was key to pu ing things into perspective for business owners, with many realising the fragility of their workforce and the huge impact sickness and death can have. As a result, business owners are now more open than ever to having those conversations to ensure stability and continuity of their operation.

Benefits to business owners Brokers now have a platform to discuss this broad range of products, along with the considerable savings business owners can make. By pu ing policies through as an expense of the business, this helps to avoid paying corporation tax, dividend tax or income tax on those premiums.

Alongside life cover, there’s income protection to help cover sick pay, which is a huge expense for small business owners in particular.

It’s a huge risk for self-employed people too, and was top priority for me personally. More broadly, there’s business loan protection, which I used recently to help a client cover a £1m loan should the business’ ability to repay be impacted.

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Operations aside, there’s valuable corporate benefits, such as death in service, group income protection and private medical policies. Everyone is looking at how they can a ract and retain good talent, yet no one is having these conversations with small business owners. My experience in a large corporate has been hugely valuable in advising clients on how to compete with these larger firms to a ract and keep hold of talent.

Opportunities for brokers There’s lots of opportunities, and a real ability to look at what each business needs and tailor products that suit. Even with routes to refer, or for those already with the right licence, so many brokers still find it daunting to have these conversations.

It ultimately comes down to the fundamentals of learning and research. Ask lots of questions, because clients like to talk about their businesses. Just as you would with a traditional client – spo ing risks in

If you want it, you have to be all in – you can’t peck around the edges” their personal setup – work out where the gaps are, present these gaps and let the client decide where they see the biggest business risks.

It’s really important to network, too. While it is true that you don’t need to do many deals in this space, because of its high value nature, you do need lots of people to do deals with. Social media is a powerful tool, and we’ve found real success on Instagram and business-to-business (B2B) platforms like LinkedIn. But rather than conquer the world, we’ve been hyper focused on remaining local.

STEVE WILLIAMS is business principal at Ginger Finance

There are more than 5,000 businesses around us in Milton Keynes, and plenty of opportunity even if we never fully stretch our legs.

Book yourself in With so many self-employed advisers in the market – including nearly 500 in Just Mortgages alone – a good place to start is your own business. All carry the same risk as their clients, and could put the likes of life cover through their business.

For those unsure where to start, I’d recommend booking yourself in – let me or another business protection adviser run through how it works for you, and then that will help you position it with your clients. Those new to business protection can then refer clients across and sit in on those meetings and see what is discussed.

This will help you to refer with confidence, and maybe eventually take on the licence to sell the products yourself. Just Mortgages is able to provide all the necessary training and support to secure the qualification.

There’s no question that it’s very different to normal mortgage advice.

I dealt with a case recently where the company’s turnover was £11m.

They were looking to insure 55 staff for death in service and income protection. I’ve seen cases where the result is a five-figure commission, such is the size and scope of the deals in play.

That’s not to daunt people, but to highlight the significant and underserved opportunity that is available. But if you want it, you have to be all in – you can’t peck around the edges. You need to get into it and understand it properly to fully maximise the opportunities and reap the rewards. ●

P RO T E C T I O N Opinion

Introducing protection to the mortgage journey

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e ing into protection when arranging a mortgage can be challenging, but it delivers a be er outcome and can produce welcome extra income.

One thing essential to ge ing a mortgage is an income, yet according to Beagle Street 30% of people with a mortgage do not have life insurance, and a Royal London study found that a staggering 80% of people with a mortgage have no income protection.

Online multi-provider underwriting Many advisers are put off by how long it can take to get policies accepted, but The Protection Platform (TPP) from UnderwriteMe allows advisers to both source quotes and apply for plans immediately, including making health, lifestyle and other disclosures.

This means the terms and prices offered are personalised, taking days, if not weeks, out of the normal underwriting process.

Advisers using Protection Guru Pro can start by generating value-led analysis of quality and price, typically in about two minutes. The quote then moves to the integrated Protection Platform underwriting process, which will take about 20 minutes if there are disclosures, and less if it is a clean application. This allows advisers to compare all available options on the platform using in-depth analysis tools, to quickly and confidently go through the process without the uncertainty of whether clients will be eligible.

It’s worth recognising that, while life cover should not start until contracts are exchanged, for income protection this really should go into force as soon as it is accepted so the adviser can start earning sooner too.

STEVE DAVEY is head of specialist distribution at Protection Guru

Telephone pre-sales teams Each insurer has a dedicated team to help advisers understand how a health or lifestyle disclosure will impact the final outcome of an application.

The more disclosure information you can gather from the client, the more accurate the indication an insurer can provide. For common disclosures, like high blood pressure, diabetes, mental health and back pain, insurers will generally ask the same questions. If unsure, you can call the insurer, provide disclosure details and ask which questions to ask your client. With this information, you can call each insurer to get an indication of terms.

Many advisers found this method painful during the pandemic, believing it to be a time-consuming process. However, most insurers returned to usual service levels in this area over two years ago, with some answering calls in under 10 seconds.

Don’t let old experiences put you off what is now a great option for pre-sales underwriting. Always get a ‘pre-sales reference’ at the end of each call for future reference.

Email pre-sales teams Similar to the above, most insurers offer for pre-sales email support for underwriting assessment. Again, the more information provided, the more accurate the indication of terms. Most offer a 48-hour response time, so it does take longer than calling.

I suggest creating an email template covering all the important information – DOB, sex, smoker status, desired products – to streamline the process. For further efficiencies, create an email group with all the pre-sales email addresses for the insurers.

Online tools Post-pandemic, many insurers have launched or enhanced their pre-sales underwriting tools. Most mimic the application process and require focused information to obtain an indication of terms. Typically, these give an accurate indication of terms on thousands of disclosures, enabling you to quickly gauge potential terms.

If you’ve used these before and been disappointed, they are worth revisiting, as many insurers have significantly improved lately, offering more accurate indications on a wider variety of disclosures. Guardian and Royal London particularly have done a lot of great work on this.

Overall, there is far more help available than just a couple of years ago, to assist in sourcing the ‘best’ and most suitable solutions for clients.

For details of all the correct telephone numbers, email addresses and demonstrations of the online tools, speak to your business development manager (BDM) or account manager, if you have one. It’s their job to make their company easy to work with.

If you’re still unhappy handling protection, consider partnering with a specialist to refer clients to. Consumer Duty requires all advisers to identify foreseeable harm and address it.

Protection specialists will focus on the right solutions for you clients, and you should be able to agree a commission split.

It is worth remembering that protection plans frequently generate more income than the mortgage itself, so extending your skills to protection can be a valuable investment. ● August 2024 | The Intermediary

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L O C A L FO C U S Birmingham

Each month, The Intermediary takes a close-up look at the housing market in a specific region and speaks to the experts supporting the area to find out what makes their territory unique

Focus on ...

JESSICA O’CONNOR is a reporter at The Intermediary

Birmingham

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he property market in Birmingham, much like that of the rest of the country, has experienced significant fluctuations over the past two years, driven by economic and market pressures.

Rising interest rates and increased mortgage costs have created challenges for both first-time buyers and existing homeowners.

Broader economic uncertainty has dampened consumer confidence and housing demand.

However, particularly following the Bank of England’s decision to cut the base rate for the first time since 2020, the market has shown cautious signs of recovery over the past few weeks alone. The Intermediary delved into the key factors currently shaping Birmingham’s property market.

Current values The average property price in the Birmingham postcode area is £278,000, while the median is £230,000.

The average price declined £6,400 (2%) over the past 12 months.

Detached homes lead the way in price, fetching £519,000 on average.

Meanwhile, semi-detached homes set buyers back an average of £278,000.

Terraced homes cost an average of £218,000, while flats and apartments fetch approximately £159,000.

The most affordable place is within

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the ‘B6 5’ postcode, with an average of £88,800. The most expensive is ‘B94 5’, at an average price of £906,000.

A busy market The Birmingham housing market saw around 14,200 property sales over the past year, marking an annual drop of over 37.3%, or about 9,100 transactions.

Despite this drop, Natalie Hines, mortgage adviser at Premier One Mortgages, says that houses in desirable areas and at the right prices are selling quickly, while leasehold properties tend to lag behind.

Hines adds that, although May and June were unusually quiet, activity surged in July, likely due to postelection confidence.

Kate McTernan, director of Redditch Mortgage Advice, has seen local agents working harder and more proactively, due to the shift to a buyer’s market.

According to McTernan, this offers first-time buyers and home movers the opportunities they missed during the hectic 2020-22 period.

She says: “There has definitely been an uplift in enquiries for residential mortgages over the last few weeks […] with news of interest rates reducing there is a healthier appetite locally for home movers and first-time buyers to be active in the market again.”

New infrastructure The price of an established property stands at £276,000, while a

newly built property averages £370,000. This suggests clear demand for newer builds, an appetite which is being satiated by a number of new developments in the area.

Hines highlights an “exciting project for the area” in the Langley Sutton Coldfield proposal, which aims to bring 5,500 new homes to the town, including 35% affordable housing.

In addition, McTernan points to significant infrastructure projects such as HS2, the Midlands Metro Extension, and ongoing city centre regeneration. These are attracting more interest from visitors and residents alike.

She adds that the relocation or partial relocation of many large and global companies to Birmingham is positively influencing the local housing market.

Popular demographics According to 2020 Census data, there were 2.0 million residents living in the Birmingham postcode area, with an average age of 37.8. This relatively young population is reflected in the

L O C A L FO C U S Birmingham

dominant buyer demographics, with Hines citing a recent increase in firsttime buyers.

She also notes a recent increase in enquires surrounding Shared Ownership, undoubtedly due to affordability constraints.

Conversely, McTernan says that while first-time buyer and home mover activity exists in the area, activity for these demographics has slowed of late.

Historically, she has seen a healthy split in demographics between residential, buy-to-let (BTL) and remortgage business, but that this has changed in the past year.

She says: “There are fewer investors entering the market, and experienced landlords have less appetite to increase their portfolios unless the deal really adds up for them.

“Our key demographic over the last 12 months has been remortgage customers, supporting them and guiding them through the potential

payment shock that awaits them at the end of their fixed rate.”

She hopes that recent relative stability and the Bank of England rate reduction will help with customer confidence, as she expects a busier second half of the year for purchases.

Established lenders The ‘big six’ high street lenders are unsurprisingly the most popular in the area. Among these, Nationwide and Skipton Building Society are particular favourites.

However, McTernan highlights that the past 18 months have started to see a more diverse lender split, driven by a focus on criteria and affordability rather than just rates. She also points to an increased reliance on building societies and secondary lenders that take a more manual approach to underwriting.

Hines agrees, noting that the Tipton Building Society remains one of the most established lenders in the area.

A buyer’s market KATE MCTERNAN director of Redditch Mortgage Advice

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roperties are taking longer to sell, and agents are having to work differently and harder. There has been a shift in supply and demand – it is a buyers’ market, with less competition and more negotiations, which gives first-time buyers and home movers a fantastic opportunity to access properties they had previously dismissed, feeling deflated by the difficulties faced trying to buy during the crazy times of 2020 to 2022.

There has been an uplift in enquiries for residential mortgages over the last few weeks, and with news of interest rates reducing – albeit slowly – there is a healthier appetite locally for home movers and first-time buyers to be active in the market again.

Customers are reluctant to make decisions quickly. Buyers are no longer buying with impulse, decisions are no longer emotionally driven.

Price negotiations with sellers are taking longer, with less compromise from buyers. With news of rates improving, and the base rate reduction, remortgage customers are taking longer to make decisions in the hope of rates reducing.

Brokers are no longer there as just a cost comparison service, but a source of advice, support and education in finding customers a solution whether it be due to complexity, affordability or just simply guiding people through what has been an extremely volatile period.

BTL has slowed, especially new purchase business. We have seen portfolio landlords be very cautious about buying over the past 18 months, some disposing of some of their portfolio because of the increased costs associated with their mortgages. We have seen a lot of investors change strategy, especially those buying under a limited company, to achieve a better return.

While the private rental sector (PRS) in the area makes up a significant 21.4% of housing stock, the local BTL market has experienced a slowdown.

Hines notes that the market has been very quiet over the past 18 months, although there are now some new enquiries.

These are mainly due to renewed consumer confidence.

Landlord caution McTernan has also observed this slowdown, especially in new purchase business, with portfolio landlords being cautious and some even selling parts of their portfolios.

She says: “We have seen a lot of our investors change strategy, especially those buying under a limited company – where they would normally buy a standard buy-to-let, these are no longer giving them the returns they need, so they are shifting to houses in multiple occupation [HMOs], multi-unit freehold blocks [MUFBs] and commercial and semicommercial properties to achieve a better return.”

She reports that remortgages in the limited company market have also been challenging, with customers reluctant to pay high setup fees for low rates or being pushed into long-term products to meet affordability.

This has led landlords to review rents to ensure financial viability.

However, McTernan adds that there has been a recent improvement in standard buy-to-let pricing.

She notes: “We have seen an improvement in standard buy-to-let pricing recently, and many lenders making updates to their interest coverage ratio [ICR] formulas, so the affordability has been a lot more generous and the monthly payments more realistic in this area of buy-to-let.”

Steady growth While the Birmingham market has faced challenges, including a slowdown in the BTL sector and rising costs for both buyers and landlords, recent adjustments in interest rates and an influx of new housing projects are fostering renewed confidence.

With a diverse range of lenders supporting this recovery, and key infrastructure projects drawing more interest to the region, Birmingham’s property market appears poised for a period of gradual but steady growth. ● August 2024 | The Intermediary

59

Clare Jarvis, Mortgage Advice Bureau:

“Why was Platform so special? e people! Such hard workers with huge respect for the amazing management team.

“I was offered my first BDM job at Platform. Moving from underwriting to sales was scary at the time, but I wouldn't have changed working with the Platform sales team for the world! e sales training was incredible and I still put that to use today.

“If I were to give advice to those starting their careers at lenders with ambitious growth plans, it would be to see as many people as possible in the time you have, build relationships and keep them forever.”

David Tweedy, StrideUp:

“Platform was special because of the people, who were flexible and adaptable to a changing market and customer profiles. at culture enabled us to lead with innovation and survive the Global Financial Crisis. ere were a lot of very good people who cared about and the business, the customer and their own careers. It made me what I am today. It always felt like a small business, even when we had 300, and was flexible in giving me the opportunity to take on new roles and tasks which meant I was able to develop depth and breadth in my areas of expertise.”

Nick Allen, industry consultant:

“Regardless of their position, everyone treated each other with respect and trust, and this stemmed directly from the directors. ey built a culture which allowed you to be creative and encouraged open communication across the whole business regardless of your position. Everyone was working toward the same objective. ey encouraged fun and laughter which gave me the work ethic of work hard, play hard.

“Platform allowed me to learn new things and go outside my comfort zone, providing the opportunity to shine. I learned invaluable lessons. One of the most important was about being a leader – managing people is not an easy task, but everyone at Platform demonstrated how to treat people with respect and fairness. is taught me the importance of a positive, collaborative work environment."

Paul Hunt, Square 1 Media:

“Marketing and sales worked closely together and I was encouraged to meet our brokers, go on events, do joint calls and build relationships and friendships that I hold very dear to this day. Finally, being given press spokesperson duties quite early on ultimately led to what I am doing now, running a PR agency.

“I learned that trust has to be earned, but to give those you trust slack. Mistakes are part of the journey, but people won't fulfill their potential if you stifle them. Also, when I crashed the Lotus Elise we were giving away as part of our rebrand, a er sweating over it all weekend, I saw Guy and he simply said it was bound to happen.

“My advice to others would be: choose your role by understanding the types of leaders that run the business, as they ultimately shape the culture and your future is very much in their hands. Also, life is too short, so if leaders take themselves too seriously or don't seem to enjoy what they do, then you probably won't enjoy working for them. If you can't have fun while you work and with those you work with, what's the point?”

Sara Palmer, The Mortgage Lender:

“For me it was the people that made the business so special. David Tweedy was a great leader, and the whole business truly worked as a team of very talented and dedicated people.

“I had been in the industry for seven years, but Platform was my first sales role. Peter Beaumont saw something in me and gave me a chance, for which I will be forever grateful. I have enjoyed a fantastic career in an industry I love ever since.

“I learned that hard work and commitment really do pay, and to always do what you say you are going to do!

“My advice to others would be to remember how vital relationships are. You can only be successful with the support of others, internally and externally. And have fun along the way! is is a great industry, where a long and successful career can be enjoyed.”

On the move...

G

GB Bank appoints Mike Says as CEO

B Bank has appointed Mike leadership and contribution to the Says as chief executive officer. development of GB Bank, which now Previously the bank’s chief has a bright future ahead. financial officer, Says “We are delighted to appoint Mike as CEO. He brings relevant succeeds co-founder Stephen Lancaster, who is stepping away a er experience and industry seven years in the business. knowledge to the role, which Says has over 30 years will be crucial as we continue of banking and finance to grow and expand our experience, having held senior business.” positions with Citibank, Says added: “We plan to Capital One, Lloyds and significantly accelerate GB Harrods Bank.

Bank’s growth, solidifying Mark Sismey-Durrant, our position as a leading chair of GB Bank, said: “I specialist lender in the UK MIKE SAYS want to thank Stephen for his residential property sector.”

Angela Norman appointed interim MD at YBS Commercial

Y

BS Commercial Mortgages has appointed Angela Norman as interim managing director, from her role as head of lending for YBS Commercial.

She said: “I’m absolutely delighted to be given the opportunity to play an even bigger role in driving the YBS Commercial business forward.

“It’s an exciting point in our growth journey, and I’ve been blown away with the team’s determination and commitment to deliver for our brokers and customers.

“A key priority since I’ve been with the business has been to focus on enhancing the customer journey, listening to and acting on crucial feedback from brokers and colleagues.

“We remain commi ed to making changes to how we operate to create be er customer experiences, as well as offering a strong alternative to the big banks with our experienced teams on the ground and purposeful propositions, which support local businesses and their communities.”

She added: “I’m looking forward to leading this fantastic team, growing the workforce and driving the business forward to deliver our ambitious growth plans.”

ANGELA NORMAN

KELLY ILES

Catalyst bolsters lending team with five finance specialists

C

atalyst has made five hires on its lending team: CATALYST Danny Scoltock, Gareth Colston, Andrea Armillo a, Jaimee Coombes, and Jade Miave. The new starters have worked for firms including Equifnance, West One, TAB, Nationwide, The Mortgage Works, and Positive Lending.

Anna Benne , marketing director at Catalyst, said: “Each of our new starters will play an important role in Catalyst’s future growth.”

Foundation Home Loans welcomes Matt Blake

F

oundation Home Loans has recruited Ma Blake as chief treasury officer to lead the capital markets and treasury operations functions, having held senior treasury roles at Pepper Money UK and Together.

CEO Pete Ball said: “We have a clear direction of travel for the business and it’s vitally important we have the right people in the right roles driving us forward to meet our ambitious plans...I’m confident we have a highly capable, experienced and dedicated team of people, both within the executive commi ee and the entire business, that are going to make a huge difference and contribution to the next stage in our evolution.”

Blake added: “We have recently expanded the treasury team with the recruitment of Steve Vance and Adam Pallister.

“Working with our supportive financing partners, we will seek to expand the product offering to our adviser partners and their borrower clients.”

MATT BLAKE

Hollingworth joins LSL as chief distribution officer

E

mma Hollingworth is joining LSL Group as chief distribution officer for the financial services division in September.

She joins from HSBC, where she was head of specialist lending, having previously worked for MPowered Mortgages, Bluestone Mortgages, and Mortgage Advice Bureau.

Richard Howells, group managing director for financial services, said: “Emma’s background, in both network and lender mortgage distribution, and her reputation in the UK mortgage market will

be invaluable as we develop our propositions for brokers and their borrowers.

“Her expertise and experience of the industry, including her knowledge of technology and data, will enable us to develop new propositions that will keep the Financial Services Division at the forefront of broker innovation.”

Hollingworth said: “I am delighted to be part of an organisation that has a very clear vision of its future in its key markets, and I look forward to being part of shaping the business for the benefit of all of our stakeholders.”

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07/08/2024 14:22